BONGIORNO:
We welcome back to the program the Treasurer.
TREASURER:
Good morning, Paul. It's great to be here.
BONGIORNO:
At the end of the biggest week, no doubt, in your political career, how do you read the reaction to your Budget?
TREASURER:
I think, satisfying. I think people have responded positively to our investments for the future, our very substantial working families package, and basically people are very pleased to see that we've brought down a responsible Budget which reins in reckless spending, but still makes the room to deliver that support for working families, and gives us the capacity for the future to make the necessary investments in health and education and infrastructure while still tackling the inflation challenge.
BONGIORNO:
Those reports this morning based on an audit by PriceWaterhouseCoopers of the Budget's own figures that at least a million will go back into the public system, and the downside of that, according to the audit, is that the States over three years will be $1.76 billion worse off.
TREASURER:
You would expect the private health industry to say that. I don't accept the validity about the modelling, but I certainly welcome a debate about public hospitals, the health system in general. We’re investing an additional $1 billion in public hospitals after a decade of neglect, $600 million over four years for elective surgery waiting lists. These are important investments. But what we did in the Budget was one very important thing, Paul. We took off a tax slug that the Liberals had left on average working families for a decade. So, people on modest incomes were paying this Medicare Levy Surcharge - for some, $500 a year, for some, up to $1,000 a year. We removed that because when it was put in place it was meant to be there for high income earners. And over the last decade bracket creep has meant that people on average incomes have been paying too much tax. We decided in this Budget that that was unfair and it should be removed. Now, if the private health industry and the Liberal Party both want to argue that that tax slug should remain in place on people earning $50,000 a year and $60,000 a year, let them do it. But this Government has proudly removed that tax slug.
BONGIORNO:
But you removed it knowing full well that you won't have to pay the 30 per cent rebate to those on private health insurance. Are the funds that you’ve allocated enough to cover these people not taking out private health?
TREASURER:
We certainly stand by our modelling. We don't accept the assessment of the private health industry that this will necessarily have the impact that the work they put out there today says it will. We haven't seen their modelling, they haven't given it to the Government. The Treasury has done its modelling. We’re satisfied they’ve got the figures correct. But at the core of this is a decision by the Liberal Party to support the continuation of a tax slug on people on modest incomes, and we think that tax slug is absolutely unacceptable, which is why we removed it.
BONGIORNO:
Brendan Nelson says his calls for a five per cent cut in petrol excise was in a response for pleas for help from his listening tour.
NELSON (Thursday):
It was the Keating Labor Government that put five cents on to the excise in 1993. We opposed it. I challenge the Rudd Labor Government to help us take it out in 2008. This is not a review, it's not a committee, it's not a summit, it's not an idea to have a meeting, it's a decision. It's decisive action.
BONGIORNO:
Treasurer, a double barb there, but Labor at least gave the impression it would do everything to lower petrol prices. This move would.
TREASURER:
It's by no means certain it would ultimately lower petrol prices at all. We saw from Brendan Nelson’s performance on radio Friday he doesn't even know how much it will cost. He was forced to admit that they haven't costed this proposal accurately. He and Mr Turnbull are prepared to blow a $22 billion hole in the surplus. On the one hand they turn around and say our Budget is inflationary, and on the other they want to spend $22 billion more. They have no economic credibility anymore. So, anything that Brendan Nelson put in that Budget Reply is simply not deliverable because it doesn't add up.
BONGIORNO:
One of his one-liners in that speech was you don't bring petrol prices down by looking at them.
TREASURER:
No, but what you can do is you can have a competitive market. We always said that petrol responded to changes in the international price. What we committed to do was to put a Petrol Commissioner in the ACCC and to make sure the market worked in a competitive way so that consumers that could access the cheapest prices. That's the point of the FuelWatch program we are putting in place - something the previous government refused to even look at through ten and eleven long years.
BONGIORNO:
Isn't it a fact, though, that petrol prices are going to have to rise if for no other reason that in the fight against greenhouse gases and climate change these fuels are going to have to rise in price?
TREASURER:
It is true there'll be some impact as we move through with an emissions trading system on the price level of a number of products. But the cost of not acting is far greater than the cost of acting. So, as we go through this year we will be engaged in a discussion with the Australian community about the construction of our emissions trading system and we'll work our way through all those issues at that time.
BONGIORNO:
When you took the decision to take the rebate for solar panels off people whose incomes are $100,000 and more, weren't you really going against the Government's own message that it was a climate change believer?
TREASURER:
There's a very, very big climate change package in this Budget - a record amount of money provided. The previous government was means testing a hot water solar rebate. We’re simply means testing this rebate, there's nothing exceptional about that.
BONGIORNO:
But it will stop a number of panels now being sold.
TREASURER:
This program was fully subscribed. One way of actually making it work responsibly was to means test it.
BONGIORNO:
When we return with the panel, we ask has Wayne Swan whipped a real showdown with the inflation dragon. And the biggest blast from the past came from Peter Costello aimed at journalists for suggesting his backbench sojourn is damaging the Liberals.
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BONGIORNO:
You are on Meet the Press with Treasurer Wayne Swan. Welcome to the panel, Jennifer Hewett from The Australian. Good morning, Jennifer. And Peter Hartcher from the Sydney Morning Herald. Good morning, Peter.
On Tuesday inside the Budget Lock-Up, the Treasurer produced graphics to boost his claims to fiscal rectitude. The key points - he has cut spending as a percentage of the economy and come up with $7 billion worth of savings in year one alone. But he didn't abandon new spending completely, nor did he shy away from increasing a range of taxes, and that gave Malcolm Turnbull a line of attack.
TURNBULL (Wednesday):
I ask the Treasurer how can he reduce inflation by increasing prices? What kind of voodoo economics is he pedalling?
HARTCHER:
Well, Mr Swan, you promised a Budget that would exert maximum downward pressure on inflation, maximum downward pressure on interest rates, and yet the most independent arbiter, if you like, which is the futures market which is very sensitive to interest rate expectations and inflation expectations, didn't blink; your Budget came and went and no change whatsoever. Does that mean that if the market can't see you exerting downward pressure on inflation, that you've broken your first promise?
TREASURER:
Not at all. I think we delivered, and we delivered in spades. We found $7 billion worth of savings, spending as a percentage of outlays is lower than any previous budget delivered by the previous government, delivered by the Howard Government. You'd have to go back to 1989, 1990 to find [spending] as a percentage of GDP as low as this. Tax as a percentage of GDP is going down. So, there have been big savings. Every single new program that we funded was matched by cuts in other programs in the Budget. It was a responsible Budget, and basically it produced a surplus of 1.8 per cent GDP compared to the forecast surplus from the previous government of 1.2 per cent of GDP. I think we’ve achieved those objectives, Peter. It's a responsible Budget, but you do have to find a balance, a balance between building a very strong surplus on one hand and having a buffer, particularly against international uncertainty, on the other.
HARTCHER:
Overall, still, you’re handing out stimulatory tax cuts and still net overall real outlays from the Federal Government are growing.
TREASURER:
No, Peter, we are not handing out stimulatory tax cuts. We have actually contracted in this Budget. It's a modest contraction and important contraction as I've just explained - 1.8 per cent of GDP compared to the forecast of 1.2 per cent of the GDP - or compared to the forecast outcome of 07/08 of 1.5 per cent of GDP.
HARTCHER:
You mentioned the uncertainty in the international economy. Yes just yesterday we saw the US Treasury Secretary, Henry Paulson, saying the worst is over, financial markets are returning to normal. Haven't you just mistimed this?
TREASURER:
Not at all, I certainly hope the worst is over. But we wanted to build a strong surplus so on the one hand we could invest in the future responsibly over time, and on the other to provide a buffer against international uncertainty, but also to pull back public demand because of the very strong inflationary pressures in this economy. So, you do get those comments from Mr Turnbull. I mean, his economic credibility is on life support. If he described this Budget as inflationary, how would he describe the last four budgets of Peter Costello, which had spending increases of four per cent. We pulled that back to one per cent in this Budget.
HEWETT:
Treasurer, the biggest savings measure that you have was actually the tax on alcopops or ready-to-drinks. In terms of the tax raised, isn’t this more of an alco-con?
TREASURER:
Not at all. Nice try, Jenny. $7 billion worth of savings, $5 billion of savings from programs, not revenue increases, not the alcopops. I think people have missed that when they’ve looked at the savings - a very big savings exercise where we've taken $5 billion away from programs and reallocated that to programs that we committed to. That's a very important change in the way in which budgets have been constructed in this country in recent years.
HEWETT:
Well, back on alcopops, however, do you seriously think there won't be a substitution effect, that people won't just swap to cheaper drinks now?
TREASURER:
Dr Nelson and Mr Hockey simply don't know what they're talking about. I have teenage children.
HEWETT:
Are they drinking a lot of alcopops?
TREASURER:
Well, they do and they do mix in that scene, and I have observed that scene a lot. Because some of these alcopops are quite dangerous, because what you have is a mix which disguises the alcohol content. When this tax loophole was put in by the Liberals in 2000, binge drinking, particularly amongst young women, took off. Basically it was a huge gift to the alcopop industry, and Mr Nelson and Mr Turnbull are arguing for that to remain. I have no doubt in my mind this will target consumption by a group of people who are engaging in drinking practices that are undesirable for them and for the country.
BONGIORNO:
The Budget has $40 billion salted away in three funds for infrastructure, health and education. But the opposition smells some crude politicking.
DUTTON (Thursday):
I don't think taxpayers accept the setting up of the biggest slush fund in political history in this country with announcements to be made on the eve of the next election. I think Mr Rudd has a lot of explaining to do.
HARTCHER:
Well, Mr Swan, what guarantee do we have that the money from those big funds, which according to the structure of this Budget is available to roll from next year, won't just be rolled out to pump inflation up before the next election in an attempt to spend your way to re-election?
TREASURER:
The guarantees that we've given in the Budget. All of these monies will be budgeted for on the bottom line, but before we get to the bottom line, thorough evaluation, rigorous evaluation. In the case of the Building Australia Fund, we've established Infrastructure Australia. In addition to that, many of these funds will be put to work through a COAG process. So, there will be an open, transparent and accountable process at multiple points as we go about allocating these funds.
HARTCHER:
But it will still be you, Kevin Rudd and others around the Cabinet table making the final decisions on this spending.
TREASURER:
Absolutely, because this spending has not been put in place for a long period of time. One of the problems we have is that the productive capacity of the economy has been exhausted in recent years because the economy has been starved of investment. So, we’re going to put this in place.
HARTCHER:
So, your safeguard is to say, "Trust us"?
TREASURER:
We are the Government. That's what people elect us for.
HARTCHER:
Will that reassure the Australian public?
TREASURER:
No, no, that's what people elected us to do. People are tired of the fact that the previous government did not take the product of the mining boom and invest it wisely for the future of the economy to expand our productive capacity, to put downward pressure on inflation, and to make sure that we could put in place first world infrastructure so we could have first world prosperity.
HEWETT:
Treasurer, the Howard Government did a lot to try and protect single income families. Now, the Budget is moving away from that. Why is that, and are you actually trying to encourage more mothers back into work more quickly?
TREASURER:
We are not moving away from protecting single income families. All of our measures are targeted at low or middle income families, whether they’re single or double.
BONGIORNO:
The gobsmacking quote of the week came from that old Liberal warhorse Wilson Tuckey, when he defended giving the baby bonus to millionaires.
TUCKEY (Wednesday):
I've been in the racing business for many, many years, and we tend to look at the high achievers as those that should have foals.
BONGIORNO:
Coming up after the break - can seniors and pensioners wait for a boost to their incomes? Syndicated cartoonist, Zanetti, sees a twist in the politics of envy over the baby bonus. The childless Bentley driver looks down his nose at the happy family: "Lucky sods."
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BONGIORNO:
You are on Meet the Press. Apart from the Opposition, the most strident criticism of the Budget came from pensioners and carers. They were looking for at least a $30 a week boost in their incomes. The Treasurer has announced a review, but nothing would placate one older woman when she called into the Prime Minister on the Neil Mitchell 3AW program.
CALLER (Wednesday):
Hello, my husband is well into his 80s, a returned serviceman from World War II. We've been married for over 60 years. We get absolutely nothing from this Budget, nothing at all, and I have to look after him. And I'm in my 80s too. For a fellow that’s got a millionairess as a wife, it doesn't do anything for me, Neil. I'm still working my butt off and I'm well into my 80s.
HEWETT:
Treasurer, the anger is palpable, isn’t it? Are they just being unrealistic in their demands of the Government?
TREASURER:
I think it's a variety of things, Jenny. I was out talking to pensioners yesterday and many of them didn't even know what we had done in the Budget. They didn’t know that there was the $500 bonus there, they didn't know we’d increased the utilities allowance by $400, and that was a $500 payment. So, there's something like $900 additional in this Budget for pensioners and for seniors. But I accept that many of them are doing it really tough, and that we do have to look at the underlying issues here, which is why we did announce the Henry review. This is the first Budget in the first six months of the life of the Rudd Government. One of the reasons that I entered politics was to help people on low incomes and to make sure that people who are on low incomes can live with dignity. So, we will look at these issues responsibly and we will do it properly.
HEWETT:
On another subject that's a rather different one, that is, the level of foreign investment in Australian resources companies. You have said that the policy is non-discriminatory. But there is a very large focus in the Government on the level of Chinese investment. Is that because of the sheer size of it or the potential for demand by the Chinese for (inaudible) resources?
TREASURER:
Jenny, I think it’s true that there has been a substantial increase in Chinese investment in Australia in recent times. But we welcome foreign investment from wherever it might come. But as you know, we published our guidelines as they affect sovereign wealth funds and Government-owned entities earlier in the year and we are applying those as applications come through the Foreign Investment Review Board process.
HARTCHER:
Can I ask you about the proposed merger between Westpac and the St George bank? Do you think there’s enough competition in the Australian banking sector that you would contemplate allowing this merger to go ahead?
TREASURER:
Well, I’ve said fairly clearly that I have no intention of commenting on that merger. At the end of the day I'll be taking a decision about that. It is working its way through all the regulatory authorities at the moment and when I have all that advice on my desk I'll be in a position to take a decision. So, I don't want to be engaged in public commentary about that individual merger.
HARTCHER:
How long will shareholders need to wait to get some response from the Government?
TREASURER:
It has to go through its processes then it will be off to the ACCC. I make the general comment that I'm strongly in favour of a competitive banking sector. I’ve have talked a lot about that this year. But it's also important we have a strong and robust banking sector as well. If there's one thing the US sub-prime crisis has taught us - is we do need to have a strong, robust banking sector. And in the context of what's occurred overseas, our banking sector has been found to have those features, unlike the banking sector in other countries. So, a variety of competing demands, but I do acknowledge that we do need a very competitive banking sector. But I'll take my decisions in due course under the law.
HEWETT:
Mr Swan, back on foreign investment, is it in the national interest to have a high level of foreign ownership of Australian resources companies?
TREASURER:
We are in favour of foreign investment and we encourage foreign investment in the resources sector. But what we have to look at, in individual cases, is whether those cases meet our guidelines. And as you know, in the case of the guidelines we published recently, when we define in the national interest we do look to the extent to which Australia as a whole gains from that investment, we look at the implications for competition and so on. So, I'll take those decisions on a case-by-case basis in the national interest. But as a general principle, we do welcome foreign investment into our resources sector, it is capital hungry if you like. We do need that capital to develop our resources. So, I'll just take those decisions one by one.
HEWETT:
In terms of one by one, would you have any problem with having like a 20 per cent or 30 per cent stake in some of the major resources players?
TREASURER:
I am not going to speculate about particular individual investments which are hypothetical.
HARTCHER:
Mr Swan, the Budget encompassed a 30 per cent increase in the intake of skilled immigrants, and the Government's also committing to going ahead with a scheme for guest workers along the lines of the New Zealand scheme. These are issues, proposals, which weren't canvassed before the election. Does the Government have a mandate for these decisions?
TREASURER:
Well, most certainly. We've always had a skilled migration program and we have always supported a strong skilled migration program. If you have a look at a map of Australia, and there's a map in the Budget papers of all the projects that are being implemented on the ground, or may go ahead in the future, there's an enormous array of projects. What we have to do as a government is to make sure that all of those projects progress in a timely way.
We have skill shortages, and as you know we have a domestic program to ramp up our investment in skills and education, and that's very important. But we'll still have a requirement, if all of those projects are to move forward, for skilled labour, and more broadly, in parts of the country there are labour shortages more generally, and we have to respond to that and we've done that with the migration program that we announced in the Budget.
BONGIORNO:
Keeping faith in the migration program is important. Do you think you can keep the public onside?
TREASURER:
I think so. We do need a balance between skilled migration and migration generally, family reunion, and on the other hand, making sure that Australians get the most of the opportunities that this country can provide.
BONGIORNO:
Thank you very much for being with us today, Treasurer Wayne Swan. Thanks to our panel, Jennifer Hewett and Peter Hartcher. Until next week, goodbye.