OAKES:
Mr Swan, happy Fathers Day.
TREASURER:
Good to be with you, Laurie. I'm looking forward to having dinner with Kim and the kids tonight, but I'm also looking forward to launching Child Protection Week today with Wayne Bennett in Brisbane. It's a very important event and it underscores the importance of the role models that adults are for children. We'll be talking about that today.
OAKES:
Okay. Well, it's not a happy Fathers Day for Mr Carpenter in Western Australia. What caused the big swing there?
TREASURER:
I think, Laurie, the result is predominately state factors. Going from an eight year government to a 12 year government is a pretty big ask, and certainly very difficult in Western Australia where Labor has not been all that successful in recent years.
OAKES:
Well, you say state issues, but they campaigned, the Liberals campaigned on your Budget excise on gas condensate which they said would increase gas and electricity prices in the West. Has that caused you to think again about that measure?
TREASURER:
No, it has not, and I don't believe that that was a substantial factor in the election. I think it was substantially decided on state issues. What the Liberal Party want to do is give a huge gift to one particular company. And we will simply not be changing our mind on that. It's a very important part of our Budget surplus. The economic recklessness of the Liberal Party in the Senate endangers that surplus, and of course, risks us having interest rates higher for much longer. In fact, if you look at the results in other by-elections, federal by-elections around the country today, you could say that they indicate that the heartland of the Liberal Party are absolutely opposed to their economic recklessness in the Senate.
OAKES:
Well, a victory by Colin Barnett will mean no more wall to wall Labor Governments across Australia. That has big implications for your cooperative federalism policy, doesn't it?
TREASURER:
No, I don't believe it does. We will work cooperatively with State governments, whether they're Labor or whether they're Liberal. We are absolutely determined to modernize the federation, to put an end to the waste and duplication in federal-state relations and to get on with the job of creating a seamless national economy. And federal-state reform is important, irrespective of which side of politics you are dealing with.
OAKES:
It's not just the national economy, though. Labor's health policies, its education policies depend on cooperation from the States. Do you think you'll get that cooperation from a Western Australian Liberal Government?
TREASURER:
Well, certainly we'll be seeking to cooperate to achieve our objectives. I think everybody in the country has an interest in ensuring that we get a national approach to critical issues of education, particularly doing something about disadvantaged schools, doing something about our health and hospital systems. We will work in good faith with a new government in Western Australia if that is the decision of the Western Australian people.
OAKES:
Assuming the Liberals form a government over there, the notorious chair sniffer, Troy Buswell, would be the State Treasurer. How will you work with him?
TREASURER:
I'm determined to work with all of the State Treasurers, Laurie, irrespective of what side of politics they come from. What's important here is the long-term national interest, not the particular political interests of any one State government.
OAKES:
This will obviously improve the morale among the Liberals, and that's got implications for the Rudd Government too, hasn't it?
TREASURER:
I think they may take some heart from this result, Laurie. But look at what's gone on in the heartland seats of Mayo and Lyne – a spectacular swing against the National Party, probably the biggest seen since federation, and of course, the Liberals struggling to get across the line in Mayo. I mean, Mayo was a one-horse race. If Brendan Nelson's got to struggle in Mayo then I think his Liberal leadership is in deep trouble. And I think the results in both those by-elections are a condemnation of the actions of the Liberal Party in the Senate in trying to wreck the Budget surplus at a time of international financial uncertainty.
OAKES:
But Labor didn't even turn up. You chickened out of both by-elections.
TREASURER:
Laurie, we have never ever been a show of winning a by-election or winning any election in the seat of Mayo, and Lyne has been a heartland National Party seat for a long period of time. You know, Laurie, what normally happens in federal by-elections is that oppositions are expected to do well. They're not expected to have significant swings against them, and that is what has occurred in Mayo where they've barely limped across the line. And of course in Lyne, the National Party has absolutely been smashed. I think both these by-elections indicate that the Liberal and National parties are actually in trouble in regional Australia.
But Laurie, can I also make this point. I think it's very tough right around the world for incumbents at the moment. A lot of people are doing it tough. People are doing it tough in business. Households are doing it tough, particularly with elevated interest rates, and particularly given the impact of financial markets, on stock markets and so on. All of these things mean that globally it's uncertain times. Governments around the world are all getting a kick in the shins, and what's occurred in the by-elections here is that the Opposition's got a kick in the shins. I think what that indicates is that Brendan Nelson's leadership is in deep trouble.
OAKES:
Well, I think that might be true if it wasn't for the result in Western Australia. That's going to be seen by the Liberals as the beginning of a comeback across Australia, isn't it?
TREASURER:
Well, the Liberal Party might like to delude themselves that federal factors were a substantial factor in Western Australia. I don't believe that federal factors were a substantial influence on that result. But, Laurie, we'll take the result on board because we're sensible; we understand that people out there are doing it tough. Households are doing it tough. Doing it tough because of 10 interest rate rises in a row under the Liberals. Doing it tough because petrol prices have been through the roof. Doing it tough because of the impact of the global financial markets on stock markets. Business is doing it tough as well. So Laurie, people out there are unsettled. We understand that and it's not surprising that governments have had a kick in the shins. But what is surprising is that in that environment Brendan Nelson and the Liberal Party have had one big kick in the shins.
OAKES:
Labor's got a huge whack in the Northern Territory. It's apparently lost government in the West. NSW voters are just sitting there swinging their baseball bats waiting for a crack at the NSW Labor Government. It does seem as though the pendulum is swinging back.
TREASURER:
Laurie, what we will do in the Rudd Government is put in place good public policy. Good public policy that will put downward pressure on inflation and downward pressure on interest rates. Good public policy that will build a surplus to act as a buffer against international uncertainty. And good public policy that will make the necessary infrastructure investments for the future that can secure our economy at a time of global uncertainty. That's what we'll do, Laurie. We'll keep getting on with good public policy.
OAKES:
Well, the National Accounts figures during the week showed that NSW is the one State with negative growth; the economy there shrank by 0.1%. Obviously that appears to be the result of an incompetent State Labor Government.
TREASURER:
Laurie, what that is the result of is 10 interest rate rises in a row under the Liberal Party. You see, in NSW…
OAKES:
But the rest of the country's had the same interest rate rises, Mr Swan.
TREASURER:
Yes, but in NSW, Laurie, as you well know, levels of mortgage stress are far higher because borrowings are far higher. For example, Laurie, I was in Western Sydney on Friday. I went there because we had the interest rate cut during the week, to talk to locals, because in Western Sydney something like 40 per cent of households with a mortgage are experiencing mortgage stress. The national figure, Laurie, is 25 per cent. So, interest rate rise after interest rate rise has had a disproportionate impact on NSW. And the other thing that's had a disproportionate impact on NSW, because the financial services sector is bigger there, is of course the crisis in international financial markets. So, both those things have had a disproportionate impact in NSW.
But put that to one side. We stand ready to work with the NSW Government in putting in place much needed investment in infrastructure for the future, because NSW is a vital part of our national economy.
OAKES:
Well, let's talk about that. The outgoing Treasurer, Michael Costa, said the State's a financial basket case. The incoming Premier said the same thing. Are you going to bail out the NSW Government?
TREASURER:
No, we're not going to bail out the NSW Government. But NSW has been particularly hard hit by consecutive interest rate rise after consecutive interest rate rise, which is why the Reserve Bank decision was so welcome. And I might note, Laurie, that the Liberals in the federal Parliament could not even manage to welcome the interest rate decision that was taken by the Reserve Bank during the week. But what we will do is get on with the job of implementing good national public policy to put downward pressure on inflation and therefore downward pressure on interest rates.
OAKES:
Okay. You said that. Let's talk about NSW. The new Premier says that things are so bad they're going to have to cut back on infrastructure. You've been saying the nation needs to increase its infrastructure to increase productivity. What are you going to do about it? Are you going to see new infrastructure in NSW cut back? Will you let that happen?
TREASURER:
What we will do is sit down with NSW and all of the other States through our COAG process and put in place our plans for the future - our plans for road, rail, port and so on, our plans for public health, our plans for education.
OAKES:
But what about the NSW Government plans that are going to have to be abandoned? Will you pick them up?
TREASURER:
No, Laurie, NSW will take decisions about their Budget in their terms. But what is different about the Rudd Government is that we are prepared to work with State governments, with local government and with the business community in planning infrastructure for the future, and we're doing that through Infrastructure Australia. We're doing that through our Building Australia Fund.
OAKES:
But you won't bail NSW out even if it looks like losing its AAA credit rating?
TREASURER:
No we're not in the business of bailing out any particular State. They have been hit, as I said before, by interest rate rise after interest rate rise and a slowdown in the national economy will certainly have had an impact on their revenues. But what we stand ready to do is to work with each State government cooperatively so we can meet the challenges for the future. And that's not something the previous government wanted to do with any State government, irrespective of their political stripes. Laurie, as I said earlier, we'll be working with a new Western Australian Government, if that's what occurs, just as we'll work with all other State governments.
OAKES:
But voters sit back and they see the NSW Government, by its own admission, a financial basket case, an economic mess. Surely that rubs off on Federal Labor, too?
TREASURER:
Well Laurie, I'm not worried about the political outcome. What I'm worried about is that national economy and getting the fundamental settings right for the future. And that's why we need a strong Budget surplus and that's why we are so determined to proceed with our nation building plans, particularly through Infrastructure Australia and the Building Australia Fund. And we are more than happy to cooperate with the NSW Government which is making a fresh start, and all other State governments in that endeavour.
OAKES:
Now, the Opposition in the Senate has blocked your luxury car tax and is planning to block a number of other measures. You're resubmitting the luxury car tax. Are you going to take on board Senator Fielding's concerns this time and be prepared to amend the bill?
TREASURER:
Well, Senator Fielding's concerns last time simply could not be met. The fact is this, Laurie, that the luxury car tax was put in place by the previous government and its application and reach applied to the rural sector, applied to the tourist industry. So, the previous government put the luxury car tax in place. We are implementing a small increase in that which adds to our Budget surplus. We're determined to get it through the Senate. The real culprits here are not Senator Fielding or the minor parties, it's the recklessness of the Liberal Party in the Senate. But we will be talking to the minor parties and the Greens about any reasonable measure to get this through. But what we won't be doing is compromising the integrity of our Budget or the integrity and size, substantially, of our surplus.
OAKES:
There's nothing you can do with this bill that would give relief to tourism operators and farmers?
TREASURER:
Well, tourism operators and farmers are not substantially affected by this bill. The Liberal Party applied the luxury car tax to both of those sectors. For example, Laurie, something like 80 per cent of the top four four-wheel drives that are in this country are not affected at all by the luxury car tax. Utes are not affected by the luxury car tax. Mini buses for the tourist industry are not affected by the luxury car tax, Laurie.
OAKES:
You did a deal with the Greens to get their support for this bill, which involved referring the question of favourable tax treatment for fuel-efficient cars to Ken Henry's tax reform committee. Will you still do that even though the bill doesn't get through? Will you still refer that question?
TREASURER:
Yes certainly, Laurie, because it's an important question and the Henry Review is comprehensive. So, I'm more than happy for it to be referred to the Henry Review. It certainly would have been on their agenda because it is a comprehensive Review anyway. We're in the cart for anything that is reasonable. But what we're not in the cart for is to let the Liberal Party vandalise the Budget surplus in the Senate, the end result of which would be interest rates staying higher for much longer.
OAKES:
And finally, the question of pensions. Could you live on the pension, particularly the single rate pension?
TREASURER:
No, the single rate pension is totally inadequate. I've made it very clear, Laurie, that we are serious…
OAKES:
You said no, you couldn't live on it. So, how can you expect pensioners to live on it for another year?
TREASURER:
Laurie, that's one of the reasons why we gave them the $500 bonus in the Budget…
OAKES:
Can't you give them an increase now?
TREASURER:
Well, we did. We gave the $500 bonus, Laurie…
OAKES:
If they can't live on it, Mr Swan, don't you have to do something?
TREASURER:
We are doing something. The first thing we did in the Budget, Laurie, was the $500 bonus plus we increased the Utilities Allowance by $400, Laurie. They're the two things we did immediately and…
OAKES:
You won't consider an interim rise?
TREASURER:
We are considering a rise. We said we'll have the report from the Henry Review back by February and it will be considered in the context of the next Budget. But the reason we put in place the $500 bonus and the increase in the Utilities Allowance was in recognition of how difficult they are doing at the moment. But we can't undo in one Budget what the previous government didn't do in 12, Laurie.
OAKES:
Mr Swan, we're out of time. We thank you.
TREASURER:
Good to be with you.