FANNING:
Welcome back to Sunday. The first of our political guests this morning is the Federal Treasurer, Wayne Swan. Good morning, Mr Swan.
TREASURER:
Good morning. It's good to be with you.
FANNING:
Let's start with the breaking news this morning, a seven-plus per cent swing against Labor in the Gippsland by-election, after seven months in the office, seems like you're already on the nose.
TREASURER:
I wouldn't say that. I mean, first of all, I would like to congratulate the National Party candidate, but I don't think the result is that surprising. I mean, cost pressures out there are significant at the moment. Inflation is at a 16-year high. That was a legacy left to us by the previous government, and on top of that, we've got this global oil shock. Petrol is at a record high. It is up something like 30 cents a litre this year.
FANNING:
But you're paying the price on that aren't you, Labor?
TREASURER:
Well maybe, well no certainly I don't think Labor is paying the price, I think families are paying the price at the petrol bowser. Inflation is high, that's why the Government treats the fight against inflation so seriously, because 16-year high inflation hasn't just occurred overnight. It has produced eight interest rate rises in a row. Put on top of that an increase in the cost of petrol by 30 cents a litre this year alone, and on top of that, we have had to bring down a tough Budget which has taken hard decisions for the long-term, and I think when you put all those things together, it does have an impact out there and maybe that is reflected in the by-election result.
But the one thing this Government absolutely understands is the cost of living pressures on families. That's why we're so serious about delivering a responsible budget, about building a surplus, and really tackling inflation for the long term. Because I tell you what, if we don't tackle inflation for the long term, interest rates will be higher for longer and people will feel the pain for much longer.
FANNING:
We will come back to cost of living and petrol in particular. But let's talk about the tax cuts that kick in next week. We've seen, as you say, huge increases in the price of petrol, groceries, childcare, mortgage repayments. Now we read that super funds are about to announce their worst performance in two decades. Those tax cuts that start Monday have already disappeared for a lot of people, haven't they?
TREASURER:
But they are very important. You might recall, Ellen, earlier in the year we were being given a lot of advice that we shouldn't proceed with the tax cuts. But we did proceed with the tax cuts. They're terribly important. They will start on 1 July and they will deliver substantial relief for households.
FANNING:
But are they already gone? Regardless of where they end up, are they already gone?
TREASURER:
Well, petrol is up 30 cents a litre this year alone. That certainly has a significant impact. When inflation hits a 16-year high, that does have a significant impact. But it is because we understand the importance of the family budget that we proceeded with these tax cuts, made room in the Budget, made the really tough decisions to cut back elsewhere so we could provide the room to provide some relief for families.
We understand that for many families they are doing it really tough and that the tax cuts will be used to make up for the increase in the price of petrol and so on, but we did what we could responsibly do and we did it because we understood the importance of assisting families in these circumstances. And not only that, we've also put forward the $500 bonus for seniors, we've increased the Utilities Allowance for all pensioners. These are all important measures that recognise cost of living pressures on families.
FANNING:
Let's turn to the emissions trading scheme. The Opposition has been accused of running a scare campaign about how this will drive up the cost of living. There is plenty to be scared about, isn't there?
TREASURER:
Well, an emissions trading scheme is a very, very tough reform. This Government will not shirk the hard decisions when it comes to economic responsibility. The previous government put the problem of climate change in the too-hard basket for too long and has really made it much more difficult to deal with. They should have dealt with this years ago. It will have an impact on the cost of living. Former Prime Minister Howard said so, and so did former Environment Minister, Mr Turnbull. They all acknowledged it would impact on the cost of living. But what we have to do in putting forward an emissions trading scheme is to do it in a responsible way. We acknowledge it will have an impact on the cost of living, and in the design of that system we will recognise that and we will be providing additional assistance to some households and to some industries because of the impact of the scheme.
FANNING:
I wonder if you haven't wedged yourself here, though, because you went to the election saying, we're sensitive to the cost of living pressures on families, working families, and at the same time you said you are going to introduce this carbon emissions trading scheme which will inevitably force up energy prices in an election year. That's a pretty big problem, isn't it?
TREASURER:
We can't shirk this hard decision. The cost of inaction, when it comes to climate change, is far greater than the cost of action, and the longer we delay action in this area, the greater the cost, so the only economically responsible thing to do …
FANNING:
But the CSIRO is saying three million job losses, three million job losses from this scheme. How do you sell that in an election year?
TREASURER:
Well, I don't know that that is the case, but we will be putting out, for everybody to look at, a Green Paper which will canvas the design of the scheme and all of its implications. We will have a conversation with the community and with households, with industry. We'll do that in a measured way, and we will produce at the end of the day a responsible decision that not only produces the best outcome for the environment in the long term, but one which is economically responsible. You see, the Opposition is now being completely reckless when it comes to this whole issue of tackling climate change. They've moved over to an approach of just cheap populism. Well, it is that approach which has already cost the country a great deal, which has delayed action, and has produced even higher costs, and that will be on their head.
FANNING:
Okay, cheap populism and part of that is the scare campaign on rising prices of petrol, but we see a report in the Fairfax press yesterday that says Cabinet has decided that the starting point for any scheme is that the Government says there will be no net increase in the price of petrol. Is that what you've decided?
TREASURER:
Well, I'm not going to speculate about what Cabinet is deciding about the Green Paper and the emissions trading scheme. That will be published around the middle of next month, but I'm not going to engage in speculation about that.
FANNING:
And I find that fascinating, because here you are in Gippsland and in the media taking a beating on this issue of petrol prices. If you have made that decision this week why not just say it?
TREASURER:
Well, we haven't made that decision this week, that's the answer to that. I'm not going to comment on all the speculation. We have not reached our final position. That is what the Cabinet is doing at the moment. But all of our approach will be outlined in the Green Paper. We will have a community debate for a long time about this. It's a very important reform. It's hard, it's really hard, but this Government will not shirk the hard decisions, not when it comes to the Budget and not when it comes to emissions trading.
FANNING:
Petrol is a hard decision, so what I would like to know is can you ever rule out cutting the federal excise on petrol?
TREASURER:
Well, I'm not ruling anything in and I'm not ruling anything out. What we are going to put forward for everybody to see and to talk about is our Green Paper.
FANNING:
Okay. You've got this process under way, but as the Prime Minister has said this week, this is hugely complicated. I think Professor Garnaut called it a diabolical policy process, or something like that. You've given yourself 18 months to draft it and 18 months to explain to it to Australians why it's necessary and how it is going to work. I mean have you given yourselves enough time for this?
TREASURER:
Well, it is a hard reform and it is one where Australia is already behind the game because of the delay and inaction of the previous government.
FANNING:
Yeah, but have you given yourself enough time?
TREASURER:
Well Ellen, we will do this in a measured way and in a timely way. That's why you have a Green Paper, that's why you move through to a White Paper.
FANNING:
Sure.
TREASURER:
But we will take our time to get all of the settings right. I believe we have allocated enough time, but we will take all of the time that is required to get the settings right, because this is so important, so important to our future economic prosperity.
FANNING:
You say you will take all the time that is required.
TREASURER:
And we believe our timetable that we have outlined is responsible and is achievable.
FANNING:
Okay. But if you will take all the time that is required. Does that mean that you won't wed yourself to that self-imposed deadline of mid-2010?
TREASURER:
Ellen, our timetable isn't determined by opinion polls. It is not determined by by-elections. It's determined by what is right for the country in the long term, what is right to create a prosperous economy in an environment where dangerous climate change threatens that prosperity.
FANNING:
Can you do that in 18 months? And if you can't, doesn't it make more sense to take the time you need? That's all I'm trying to say.
TREASURER:
I'm not going to speculate about that. I mean, we've got a realistic timetable out there, a timetable of engagement with the community, a timetable of consultation with the business community. We think we've left plenty of time for that to occur, but we will take our decisions in a responsible and measured way.
FANNING:
Okay. Malcolm Turnbull warns that if you get this wrong, you will crash the economy. He is right, isn't he? This is that big?
TREASURER:
Well, Malcolm Turnbull left this country an inflation rate at a 16-year high which has produced eight interest rate rises in a row and that is having a very substantial impact on this economy.
FANNING:
But I'm talking about your challenge.
TREASURER:
No, I want to make the point that when it comes to the tough decisions – whether it's tackling inflation, whether it is introducing an emissions trading scheme or tackling climate change, or whether it's modernising federal-state relations or modernising our tax system, we're up for all the hard decisions.
FANNING:
But you've just told me this is difficult. Is this so difficult that if you get it wrong it could have dire economic consequences?
TREASURER:
Well, our objective is to get all of the economic settings right.
FANNING:
And if you don't?
TREASURER:
And to do it in a measured way. The previous government didn't get the economic settings right. They went on a wild spending spree, they didn't attend to capacity constraints in the economy that has produced inflation at a 16-year high, on top of which we now have an oil shock of enormous proportions. So, I don't think they are in a position of lecturing anyone about getting the settings right. We understand the importance of it and we understand the importance of action in a timely way. FANNING: A couple of quick questions if I can. Compensation - you are going to make billions out of this scheme. You've already got billions sitting in the coffers in Canberra. You could completely compensate people for the cost of this. Will you do so?
TREASURER:
Well, certainly there will be revenue raised from an emissions trading system, and every cent of that revenue will certainly be used to assist either households or the business community with the impacts of this scheme, there is no doubt about that. There is no doubt that there will be some revenue raised and it won't be used for any other purpose other than to ensure that the scheme has integrity and those people who need assistance will receive it.
FANNING:
I'm being told to wrap so don't get me in trouble, give me a quick answer if you can. The solar rebate, all this debate, emissions trading is about making us more energy efficient. Doesn't that make that decision to make the solar rebate means tested just crazy?
TREASURER:
Not at all, because the program is now fully subscribed. It is still being subscribed.
FANNING:
So you won't review it?
TREASURER:
No, there is a limit on the amount that the Government can spend. We've got an inflation situation, we've taken some tough decisions, that was one of them, but it is a decision which is still seeing assistance go to people who need it.
FANNING:
Wayne Swan, thank you so much for your time.
TREASURER:
Thank you.