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National Press Club -

View in ParlView

Address to the National Press Club

12 May 2010

Thanks very much Ken [Randall] for having me here again and thanks to all of you for your interest
and your attendance here today.

I know a few Treasurers before me have done more Budgets than the three I've chalked up. But three
Budgets have been enough to establish in my mind that the Press Club is a particularly discerning
post?Budget audience. An audience that is already familiar with many of the numbers I presented
last night, and one that won't take kindly to hearing them all again today.

I appreciate the informality of the post-Budget speech. And I want to take the opportunity today to
step back a little from the detail of last night's documents.

I want to say something about how far we have come in the past three years, something about the big
challenges and opportunities that I see before us today, and then something about what all this
means for our plans going forward.

I'll also talk about the Budget itself, but mainly in the context of this wider, more personal
perspective on what I think is a pretty remarkable economic story.

It's fair to say the past few weeks have been far from typical budget preparation. I've been to a
G20 meeting in DC, spent time on Wall Street, delivered a tax reform package, and now a Budget.

Plus I've been receiving almost daily briefs on the unfolding situation in Greece - a situation
that concerns us all, but most of all Greece and its neighbours in Europe.

Some Global Content

I want to start on the international front today, because it sets so much of the context and also
underscores how remarkable our performance has been.

A couple of months ago there was a G7 meeting in Canada. No doubt the economics commentators were
aware of this, but it was pretty clear from the lack of reporting and excitement that the world has
lost interest in the G7 or the G8.

For Australia, where the really big change has occurred is the emergence of the G20, of which we
are of course a member, as the broadly representative and widely recognised coordinating council
for the global economy.

Not since World War 2, when Australia had a voice in the formation of the IMF and the World Bank,
have we played such a significant role in global economic discussions as we do now.

This new central body of global economic governance is more than twice the size of the G8 in terms
of numbers of members, but even so nearly 90 per cent of independent nations are not included in
the G20.

And it is not the size of Australia's GDP that makes us an indispensible member of the G20. We are
included and we keep our place because of the quality and relevance of what we can bring to the
discussion. We continue to punch above our weight in this respect, and we will do a lot more hard
work in coming years to strengthen the range and depth of our contributions.

We should never take our inclusion for granted - we earned it through our constructive
contributions and we will have to earn it time and time again.

My experience of the past few years is that Australia's strong performance during the global
financial crisis and its aftermath elevated our standing in the eyes of other members.

When I was at the G20 Finance Ministers' meeting two weeks back I was struck by just how patchy the
global recovery really is - countries like ours looking to the future; others still sifting through
the rubble of a deep recession and the aftershocks which keep reappearing in different forms.

Our inclusion is also about much more than our strong performance in the crisis. It is also the
unique economic model we showcase to the rest of the world. We are an example of the benefits of
globalisation, but also a great example of fairness.

We are showing the world that it is possible to be an open, market-driven economy, and also a
society which takes care of the old and the sick and the jobless, and which shares fairly the
considerable benefits of economic prosperity. Those of you who know me know how seriously I take
this responsibility.

A Tale of Three Budgets

Now we come to a discussion of the three Budgets I have now delivered and what brings them all
together. Looking back on those Budgets reveals an exhilarating 30 months. It hasn't ever been
boring.

We came to government at a time, you might recall, when inflation was rising and the Reserve Bank
was tightening monetary policy. One of the first decisions the PM and I made was that we must not
risk adding more pressure to interest rates, adding to the burden on Australian homeowners and
businesses, by adopting an expansionary fiscal policy.

But we also knew that there was a substantial infrastructure deficit left by 12 years of neglect.

The first Budget found a difficult balance. We decided on a tight fiscal policy. At the same time
we had to set aside the money we needed for infrastructure and education, and we set up the
mechanisms which would identify the priorities when we came to spend it.

We could have spent a lot. Our predecessors had shown the way. We decided not to follow it.

Not four months after that first Budget, Lehman Brothers went under, and the entire global
financial system very abruptly found itself swaying on the edge of a cliff. We had plenty of good
reasons to be very worried, and we were. I'm not too proud to say I didn't sleep much at all.

We knew that our banks were sound, but in the circumstances of September and October 2008, even
with our financial system being well-capitalised, well-regulated and well-managed, and with very
safe lending standards, Australia was not immune from the collapse of confidence in the global
financial system.

Whatever else happens in this job, whatever else happens to us as a government, I doubt I will ever
be prouder of our officials in Treasury, the RBA and APRA, of the Government, and of the Australian
people, than I was in that sudden global economic catastrophe of 2008.

Australians were concerned - as they should have been - but they did not panic.

We moved quickly to ensure our banks maintained access to global capital markets on competitive
terms, to support the continued flow of credit through the Australian economy. And we prepared an
immediate package of decisive fiscal measures to support spending and confidence, while working to
prepare another.

Again we were harshly criticised. Some critics said it was too much too soon. Others said it was
too little too late. At various times the Opposition contributed the view that it was too much and
that it was too little, and that it was too soon and that it was too late.

But at the end of the day, we knew we had to move very quickly and we did. And of course, our
stimulus worked.

It worked to sustain household spending, to support confidence, to support construction, and to
support investment. Most importantly for me, it saved jobs.

In the OECD as a whole, unemployment has increased by over 15 million since December 2007. The US,
the UK and Europe experienced their deepest recessions in years and are only now emerging from
them.

Bearing in mind the severity of the global recession, it is a remarkable thing that more
Australians have jobs today than when we were elected to government at the end of 2007 - and not a
few more jobs, but over 300,000 more jobs.

It's also remarkable that our GDP, our economic output, is substantially higher today than when we
became a government, and that our exports are higher by both value and volumes than what they were
at the end of 2007, the peak year in world economic growth.

The 2010 Budget

So we come to the third Budget, in many ways the most complex of the three and in some ways the
hardest to construct given the strictness of the fiscal strategy we imposed on ourselves. With
responsible management the Government will halve peak debt and get the budget back in black in
three years, three years early.

It wasn't easy, but last night's Budget is still one that most of my ministerial counterparts in
other countries would love to hand down. While other countries are going through a white-knuckle
ride, we are delivering the stable, steady economic leadership we've always wanted to make the
hallmark of our Government.

It is a Budget that builds for the future on the success of our economic policies in recent times.
I think its strength is that it gets the basics right - and it gets them right for the long term.

It used to be the case that each Budget was a slight variant on its predecessor. In the case of the
last three, each has been dramatically different as we responded to dramatically different
circumstances.

Last night's Budget marked another shift. We have started to close the budget gap more rapidly than
I expected. Growth is rebounding, revenues are returning, and surplus is within sight.

They will never admit it, but every government faced with these conditions in an election year has
the temptation to misuse the return to growth to buy votes. It's something we saw a lot of in the
last few election year Budgets.

We ruled out an election year spendathon from the very beginning. The vote-buying of those years
was obscene. I never completely understood Peter's need to pull rabbits out of a hat then lecture
the country about how clever he was. There has to be a greater purpose to government than that.

The Government I'm part of didn't choose the times. Like anyone, we would have preferred to have
managed the economy when the going was easy.

Our plan was to employ the gains from the longest boom in memory to secure the future of the
country - by investing in education and skills, reforming the health system, modernising
infrastructure, creating better public services.

It's still our plan, despite all that's happened. And to the extent it's been possible, we've used
the stimulus to rebuild and reform and create new capacity for the long term.

Obviously I care what you write about our Budgets and obviously I'd rather you write nice things
than critical things. But it's been a bit different this time around.

I deliberately described it as a no-frills Budget, because it is. I deliberately described it as
workmanlike, because it is. I said it sets a new benchmark for responsible Budgets, and it has.

It may not be an electioneering Budget, but it's a Budget I'm happy to be judged on by the
Australian people, who expect and deserve the highest standards of responsible fiscal management.

Why It Matters

I'm really proud of what we could do in the Budget to boost national savings; build the skills and
infrastructure base of the economy; and invest in renewable energy and the health system while
offsetting the lot. It is the fiscal story that matters most.

I hope you agree that these initiatives marry economic necessity with enduring Labor values.

I know you don't want me to run through every initiative again or all the dollar figures and start
dates and the like. So I want to do something a bit different today: instead of giving you chapter
and verse I want to tell you about just one of our initiatives - the Apprenticeship Kickstart we
extended last night. It says a lot about why Budgets matter.

As you know, the new program will provide an extra incentive of $3,350 for small and medium
businesses to take on a traditional trade apprentice in skill shortage areas. It will provide
greater access to training and support for around 22,500 young people around the country.

I'm indebted to my friend Jason Clare, the Parliamentary Secretary for Employment, for telling me
last week as I put the finishing touches on the Budget, about what this program has meant for young
people who want to be the tradies that build our country up into the future.

Jason tells me the Apprentice Kickstart, alongside the targeted support from our fiscal stimulus,
has already boosted traditional trade apprenticeship numbers back to pre-global recession levels in
just one year. To give you a sense of this achievement, what it took us 12 months to do, it took 13
years to do following the 1990s recession.

Twelve months - not 13 years - to rebuild the apprenticeship base - that means a lot to us.

Think about that for a moment - we repaired our apprenticeship base through good management and the
intelligent design and implementation of a good program.

That 13?year recovery is one of the reasons why pockets of the economy were crying out for skilled
workers as the last boom gathered pace.

This one simple fact doesn't just sum up why we extended the program last night; it sums up the
kind of difference you can make in government. It sums up the kind of difference we have made and
the kind of difference I will always want to make so long as I'm in public life in this country.

The Opponents of Reform

I honestly don't think our political opponents feel this sense of purpose. I don't think they feel
the same responsibilities to working people and their families that we do.

I don't say this lightly and I don't say it glibly. I say it because it is the only possible
judgement on a Coalition that was happy to let families swing in the breeze when things got really
willing in the global economy. In Australia's hour of need, they were nowhere to be seen.

Their vote against stimulus wasn't just the stupidest economic decision they could have made, it
was also the cruellest. Australians were relying on all of us to do the right thing by them and I'm
sure they were as surprised as I was to hear Mr Hockey and Mr Abbott argue we should do nothing.

Now our opponents give every indication of making the same mistake again, with tax reform.

We've got used to Tony Abbott's view on government policy: first, oppose it. Second, read it.

It was no different on tax. Anyone who thinks Mr Abbott is a serious alternative PM should remember
he is the guy who opposed an ambitious tax reform package before he'd even seen it.

Unfortunately Mr Abbott's approach fits nicely with the approach taken by others who oppose the tax
package I released just a little over a week ago.

It is fine for private businesses to exploit these natural resources which are the endowment of all
Australians. All we ask is that there should be a fair and reasonable distribution of the benefits.

As the independent tax review work showed, Australia's mining sector has been comparatively lightly
taxed in recent years. I think there is a pretty good case to capture a little more of those
profits.

I've listened to the concerns of mining industry executives over the last week and a bit. Their
views are respected and valued. And I understand that they personally have a big stake in stopping
this reform to our tax system.

But the iron ore, the coal, the gas, the petroleum and other resources - these things don't belong
to companies; they belong to our country. And we have a duty to ourselves, to our children, to
ensure we get the best long-term returns from them. That we convert them into something that lasts.

Our resources aren't a boom to be squandered; they are our family farm and our family house; they
are our nation's superannuation plan; and they are what will build a better future for our
children.

Our resources are plentiful. But they are not going to last forever. We can't take them for
granted.

And we can't go back to the lazy complacency about mining booms that characterised our predecessors
- an attitude that lives on in Mr Abbott and Mr Hockey in particular.

Optimistic about the Future

Let me finish by saying Australians have some reason perhaps for quiet satisfaction about the last
18 months or so, but no reason at all for complacency.

For one thing the global economy is still fragile. As we have seen in the Greek crisis over the
past few months, global financial markets are becoming increasingly wary of lending to governments
in which they do not have complete confidence.

We don't yet know how that will play out, but given the size of sovereign debts and the probability
of deficits for years to come in many economies, we know there is every reason to be wary and every
reason to stick with the strong, sound and credible fiscal policies we demonstrated last night.

Then there are longer-term issues we need to deal with. It's important that we get young
Australians into jobs or into training so they can acquire the skills that are so essential for new
entrants to the workforce. That's a big priority for us - one of many.

I think there is a lot more we can do to remove impediments and constraints to growth in the
Australian economy, from the way we handle water and energy issues to the way we handle transport
and infrastructure.

There is a lot of meat left in tax reform and you will hear more about this in coming years. And we
know we need to prepare now for the inevitable ageing of our population.

Putting together the Budget I released last night was a tremendous privilege. I got to work closely
with Kevin and my Cabinet colleagues - people like Lindsay and Anthony and Chris and Julia and
others. I got to work with the dedicated Treasury officials - some of the most talented people in
the country.

I also got to construct a Budget that says a lot about Australia. A quietly confident country, full
of practical, resilient people who can stare down a global recession then move onto the challenges
of recovery without missing a beat.

I'm proud of them and I'm proud of our third Budget.

Thanks again and I look forward to your questions.

As usual we have a period of questions from our media members.

I thought we were going to get quite a different speech when you opened with speech when you opened
with "Three Budgets have been enough..." but as things led on I got the sense that you might want
to deliver a few more. Treasurer, I know you don't comment normally on individual movements in
interest rates but what effect do you think your Budget will have on monetary policy in the broad
and what is your promise to the Australian people on interest rates as you seek re-election in the
next several months or so?

I think the fiscal consolidation in this Budget would be welcomed by the Reserve Bank. This is the
largest fiscal consolidation since the early 1960s, because when we put in place those fiscal rules
last year when we were putting stimulus into the economy, we were deadly serious about applying
these rules when growth returned to trend, and apply them we have. And indeed we've not only
applied them to the point that they went before under the old rules, which was the 2% went through
until the Budget came back to surplus, we have now decided to extend that 2% cap until the Budget
comes back to surplus of 1% of GDP. So what we have put in place is a very big fiscal
consolidation, and a medium term fiscal plan which, I think, would give everyone confidence that
the Government is absolutely serious about fiscal discipline. And secondly, one of the challenges
we've had as an economy for some time - and it was evident at the top of commodity boom mark one,
is that the capacity constraints on our economy were putting upward pressure on inflation and,
therefore, interest rates and from day one, we have dedicated ourselves to invest in
infrastructure, to invest in our skills base, to invest in training, to reform the competitive
arrangements in our economy, to ensure we lift the economic capacity of our economy. And that is
the most fundamental thing you can do to put downward pressure on inflation over time. So the two
things that governments must do as growth returns and as growth moves above trend is to put in
place fiscal consolidation. That has been done and has been done in a way which is bigger than any
of the previous fiscal consolidations we've had, and bigger than the fiscal consolidation that
occurred when the Howard Government was elected. We've done that for very good reason, because we
understand the need for a set, for settings which put maximum downward pressure on inflation and,
therefore, maximum downward pressure on rates. But at the end of the day, the Reserve Bank takes
its decisions independently of Government. I'm not going to stand here and say what John Howard
said some years ago, so inaccurately and much to his discredit, governments can do, governments
should do everything they should do within the terms of fiscal policy which they control to put
maximum downward pressure on inflation and, therefore, to have a very welcome effect in the wider
economy. the wider economy.

You've based your sales pitch in the Budget last night on economic credibility, so I'd like to ask
you whether in that Budget, there are about I think $2 billion worth of decisions taken but not yet
announced. I'm wondering if you could give us a commitment that would be the limit of your spending
between now and the election, and secondly, whether you could tell us what is on the table and what
is off the table in negotiations between the Treasury tax panel and the resources sector?

That's two questions. In terms of the contingency reserves, the items in the contingency reserve
generally relate to matters which are commercial inconfidence. Sorry? The decisions taken, but not
announced. Well, that certainly is within the framework that I've outlined Laura, so we are not
moving outside of that framework in terms of going through the election. I think as I made very
clear yesterday, we are sticking within this fiscal framework not just for the election, but also
if we're re-elected into the future until surpluses get to 1% of GDP. In terms of the discussions
with the mining industry, there are over 80 companies that are in discussions with the consultation
panel. They've been proceeding at a furious pace for over the last week and a half and they are
continuing. We're serious about a sensible discussion. We outlined our framework last Sunday week,
but we also in that framework made it very clear that we wanted to talk to companies about
transitional provisions, that we were open to a discussion about the impact in their particular
areas, and we'd work through all those issues with the companies, which is what we're doing now.

My question is from the fast lane of the 2-speed economy. Do you agree with Rick Battelino, the
deputy governor of the Reserve Bank when he said that if the resources superprofits tax caused one
of the big mining projects to fall over, it would be the best thing for the Australian economy?

No, I don't. What the Government wants and what we will do is respond to mining boom mark two by
taking into account all the challenges that flow from a further mining boom and most immediately,
the immediately, the challenge of a 2-speed economy, and I outlined at great length when I released
the tax reform package why we were putting in place the various reform elements on which every
dollar of the money that comes from the superprofits tax will be going and invested in economic
reform to ensure that we spread the benefit across the whole economy and put in place the sorts of
reforms that go to the core of the independent tax review, and one of the central recommendations
and themes of the independent tax review was that we should move towards a lower rate of corporate
taxation and we have proceeded to do that with some of the revenue from the resource superprofit
tax. That's one of the areas where we want to invest some of that money, because there are many
companies that don't immediately profit and don't get in the fast lane, including even in Western
Australia, don't necessarily get in the fast lane. Many small businesses that still do it tough and
can benefit from a more competitive corporate tax structure, and that's why we put so much emphasis
not just on the overall corporate rate, but starting it earlier for small business and that's why
we moved particularly to put in place that $5,000 instant write-off for capital items for small
businesses, because in mining, as in the rest of the economy, we want some settings that make sure
that small businesses can become large businesses, and they don't necessarily get strangled in
their infantcy, that we have a settings in our economy that encourage people that are
entrepreneurial, that are willing to have a go, willing to put their money on the line, and that is
the argument that goes to the core of the recommendations on corporate tax in the independent tax
review. The second part of the argument that goes to the core of that is making ourselves more
attractive for international capital, as well, because we are a capital-hungry country, we will
remain so for a long period of time. So that is the argument about making sure that we spread the
benefit across the economy, particularly to the business sector, which is so important to our
future. So all of the revenues that are raised go to those various tasks. Building up a national
savings pool. We could not have got through the global recession the way in which we got through
the global recession if it hadn't of been for the far-sighted decisions of the Keating Government
to put in place national superannuation, because that was one of the essential cushions that Wes
used during the global recession when there was a meltdown on international financial markets and
businesses have used that international superannuation pool to recapitalise and reenergise, and
repower this economy. When I travel to G20 meetings, there are two areas of policy over and above
basically your medium term fiscal strategy and your Budget bottom line that Finance Ministers talk
to me about around the world, and these go to the core of how the sustainability of a Budget and a
nation is judged by our international peers. There are two policy issues that go to the core of
that. One is health, the other one is retirement incomes and national savings and, of course,
they're both linked. Fortunately for us, because of the far-sighted reforms of earlier governments
we're in a good starting point to further reform both of those areas. Medicare did so much for this
country in terms of containing health costs but spreading opportunity and, of course, national
superannuation has done so much to give a nest egg to so many workers in this community. We start
from a better base than just about any other advanced economy in those two areas of policy and the
ambition of this Government is to build on those things, to build on those things, because they are
enduring strengths for our economy as we go forward, and maximise the opportunities that will come
to us from the Asian century. Asian century.

You said that the fiscal story mattered most, does that mean that your absorption in fiscal
discipline means that some groups such as the disabled will have to wait a year before they get any
a year before they get any substantial benefits from government spending? Are they the lesser
story?

Not at all. I'll just take you through a bit of history here. This Government put in place the
single biggest increase in the base rate of the pension, which goes to the disability support
pension, who were always previously left out when largesse was put out by governments on a one-off
basis. We put in place that fundamental increase in the base rate of pension which not only went to
all age pensioners, but went to all disability pensioners, and that is something they had been wait
r for, for such a long time. A very, very important decision taken in our last Budget and taken in
probably the most direst of economic circumstances to be making that decision and we decision and
we offset all of that in that Budget by the way. There is a measure in here for new people coming
onto the disability support pension about how they're assessed and it's not primarily or in any way
a punitive measure. This is an area of policy I spent a lot of time in my public life concentrating
on and in some ways, there's no area of ways, there's no area of policy where we have failed more
than when it comes to a very significant number of people who are on disability support pensions
who don't necessarily have a pathway, not just into employment, but maybe into some other form of
activity in life. So there's a big agenda for the Government as we go forward and nothing which is
setting out to punish anyone in this Budget in terms of the disability support pension, bar
pension, bar some new assessments for new people coming onto the pension as we move forward.

You spent some time in your speech reflecting on the past three years and the things that have gone
right, what about your reflections on some of the things that haven't gone so well, particularly
the problems in the insulation and school building program. What lessons have you learnt from the
problems that did occur? Why do you think those problems arose, and what will you do to make sure
they don't happen again?

Firstly, I don't accept the characterisation that has been given to the Building the Education
Revolution Program. I think it has been a tremendously important and valuable program for Australia
that did so much to keep this economy ticking over through last year and as I move around Australia
when you've got well over 20,000 projects,, of course, there'll be some problems in some projects
but by and large this has been a very good program which is delivering legacy assets which will
last a long time in schools which haven't seen any investment in some cases for years and years and
years. But more importantly, as you drive past these projects, in areas where there is no work in
the non-residential construction sector and you see all the utes and all the tradies that are
swarming around these projects street by street across the suburbs you understand what an important
role that program has actually played in supporting employment, particularly in the non-residential
construction sector and I can speak for my suburbs and my city in Brisbane and say that if it
wasn't for the programs going on there, there would be tens of thousands of tradies and small
businesses out of work with their their doors shut if it wasn't happening. That has been gradually
withdrawn at the moment. As we said we would with stimulus, but the truth is in that sector things
are still relatively soft. It has played a really important role in keeping up the skills of a
whole lot of workers. When they're finished there we'll be moving onto other projects in the
private sector. But if those projects hadn't taken place, these people would have been on the
scrapheap, probably for as long as 12 or 18 for as long as 12 or 18 months, with all of the capital
destruction and skill destruction that flows from those resources not being employed. So I don't
accept the general characterisation of Building the Education Revolution. Yes, there have been
problems in the insulation program, very significant problems, terrible problems when it comes to
the application of occupational health and safety rules. Terrible ones, which we've got to get to
the bottom of, which is why we are so serious about the audit process we're going through at the
moment and making sure we get it right and fix it.

The Opposition's campaign, rather successfully if the polls are any guide, on the twin so-called
evils of debt and deficit is it your claim today that you've effectively muted that campaign now,
that that isn't a criticism they can validly make?

Can I just make this point, and I think it's a really important one, and that is if the Opposition
had had their way, Australia would have been in recession last year and deficits would have been
far higher, Government revenues would have been far lower. Unemployment would have been far higher,
and debt would be far higher. The fact is that debt is lower, unemployment is lower because we put
in place that stimulus. We borrowed responsibly for that stimulus because that's what you do when
the global economy falls off a cliff. And what you do is as the economy recovers, you pay back the
borrowing and that's what last night was all about. It demonstrated how serious we are, because if
you're going to be serious in this business and you're going to be an economic conservative, it
works both ways. When there's a big challenge on your hands sometimes you have to take on a bit of
debt to invest in the nation. And, of course, when better times return, you pay it back. That's
just commonsense. It's commonsense that has alluded the Opposition. So they may think that they've
got some argument running for them in the public about that, but what we've demonstrated is that
we're capable of handling adverse ity, very substantial adversity and handling it better than just
about any other advanced economy. But also understanding that in doing that you've got to apply the
sort of fiscal rules we outlined when we did the borrowing, because you've got to recognise that as
the economy grows again, as this area in this part of the global economy grows again, you pay down
your debt. So the Budget's back to surplus in three years and three years earlier than expected and
we're halving our debt, halving net debt. Our net debt is the envy of the world. I mean, it is a
tiny fraction of the net debt that is owed by most other major advanced economies, a tiny fraction,
but we understand how important in a globalised world when we're a country of only 20 million
people located where we are, it's good that we do need to have our Budget in good shape and we have
to apply strict discipline. So all we're doing with this Budget is what we said we would do in our
last said we would do in our last Budget if growth returned to trend or above trend and that's
precisely what we are doing, because the two are linked. We moved to counter the savage impact of
the global recession. We did that successfully, and having done that successfully, we've got to
move onto the enduring gains which will come from a return to growth. Because Australia is so
fortunate, you know, we are just in the right just in the right place in the world at the right
time and as I said before, you know, we are in what is truly going to be the Asian century, and the
opportunities for growth that can come to Australia, not just in terms of China, in terms of India,
but all of the other countries of the region are immense. Provided we get in place the right
reforms, providing we deal with the ageing of our population, one ageing of our population, one of
our biggest domestic challenges, providing we meet all these head-on, providing we actually get
ahead of the game, then we can deal with all of those and that takes us back to what we were doing
in the tax package in the Budget. Building up our national savings, bringing the Budget back to
surplus, dealing with our capacity constraints - it's all linked.

I'd like to ask you about some of you about some of the priorities in this Budget. We know
obviously about health spending and skills apprenticeships as you mentioned, but in terms of new
spending you're also spending more on border protection than you are on the environment. In terms
of some smaller ticket items, you've dedicated $30 million to a climate change advertising
campaign, half of that before 30 June, and $10 million in a one-off grant to million in a one-off
grant to the union movement, also before 30 June for what's called national workplace education and
sounds suspiciously also like advertising. I'd like to ask you why those areas were able to qualify
for funding when areas like mental health were not.

You can't just see one Budget separate from the previous two. For example, the centrepiece of our
Budget last year was, in fact, education and we and we moved dramatically the recommendations of
the Bradley review. You could say of this Budget "You haven't got a lot more on education this
year" , it's only because we did education last year and changed and whole base of funding. You
could say the same about pensions, but we put the biggest increase in pensions last year. It's very
unfair to take a one Budget view of these things things and in that case, I think your criticism of
the environment is wrong. We already have a very big package in renewable energy there. We had in
the last Budget the clean energy initiative and we're building on that and, of course, we would
rather be here today talking about the CPRS as the market-based mechanism to talk about climate
change. That's been denied us by the Parliament, so we have to move on in the absence of a on in
the absence of a CPRS and do what we can do in the area of renewable energy and energy efficiency
and we've used the savings from the removal of the CPRS to do precisely that, but it builds on very
big initiatives in the Budget last year in this area of renewable energy and clean energy.

The

energy and clean energy.

The electoral threat of the ETS in parts of Central Queensland has now disappeared, but is Labor
concerned about fighting an election in battlegrounds like Flynn when you're up against a campaign
targeting the resources mining profits?

Certainly there is a very big fear campaign being waged by sections of the mining industry. Similar
to the one that they waged back in the late 1980s when late 1980s when the PRT came in, it's
cunningly similar. We pulled out all of the statements from the major players, all of the
predictable statements from the Business Council and others around the time this was going to be
the end of the world. Well, that went on and it's working very well. The biggest project approval
in the history of Australia last year, the Gorgon project approved under the PRRT. Now, we are
going to have a debate, I have a debate, I respect the right of the industry and sections of the
industry to raise their points of view, criticise us publicly, engage in all of the argy-bargy, but
at the end of the day what we have to do is look after the national interest and there's no way
that I as a Treasurer or indeed anyone in my office could have received the analysis about the
analysis about the deficiencies of the royalties regime and the lack of value the Australian people
were receiving from their resources because of those inadequacys and just said "Oh well, it's all a
bit too difficult, we won't do it prior to the election" and then left that uncertainty running
around the block, as well. The fact is that there are State Premiers jacking up their royalties
right now in recognition of the fact that they have they have not been getting that mechanism
right. We received a recommendation which, I think, befits a national economy in a globalised
world. We must have a national regime in this area. It is not a matter of choice. We just must have
one. If we are going to be a major player globally we can't have this system of royalties the way
it is. The States have some rights and certainly they're entitled to receive revenue, but but what
I have an argument, is thing you need is a national regime. Then, of course, there is the argument
about how much is fair? What encourages investment? The thing about the design of this tax, hate it
or love it, it aspires to encourage investment over the longer term. Now there'll be people who are
going to criticise various aspects of the design, I understand that. What we will do is genuinely
go through all through all those issues through the consultation process, but it was not an option,
it was not ever an option having received that recommendation and particularly the numbers about
the lack of return through royaltys and what it's cost the country. For me as a national Treasurer
to sit there and say "Oh well it's a bit difficult, we'll ignore it, it might cost us a seat here
or seat here or there". There's a national interest argument here which is very substantial and
that's why the Government moved.

Given the surprise strength of the rebound in the economy, is there a risk that we could return to
surplus even earlier than you're predicting, as some economists have suggested?

Well, we'll always hope. Of course, look hope. Of course, look we put together our forecasts. Our
forecasters do a pretty good job, their forecasts are generally the same in this Budget as they are
from the Reserve Bank and they're broadly in line with the sort of forecasts you're reading from
international organisations like the International Monetary Fund. But what we do is there are
swings and roundabouts. I think our forecasters are reasonably cautious. They copped a lot copped a
lot of grief last year, they copped a hell of a lot of grief last year. The big criticism last year
believe it or not, is the Treasury and the Government were too optimistic. Our forecasts were too
high - that was the big criticism last year. You couldn't possibly be forecasting growth of 4%, or
4% plus in the out years, they said it was impossible. Well, it wasn't impossible. it wasn't
impossible. So there's always this debate around a Budget, if you can't attack the credibility,
just attack the forecasters and that's about where it's got to, particularly in terms of our
Opposition.

You've said your tax measures, including a couple in last night's Budget are dependent on the
mining tax going through, but going through, but why should that apply to the superannuation
guarantee, that part of the package, when much or most of that will be financed not so much out of
the company tax reduction, but out of future enterprise agreements? And also, I think you didn't
answer the question that Karen threw up -

Oh, I don't believe that.

About those couple those couple of advertising campaigns, could you answer that?

What was the first question?

Mining taxes against super.

Oh, OK. Well, we made it very clear last Sunday week that all of the revenues would be directed
towards reform, every single dollar and, of course, if we didn't have course, if we didn't have
that money then we weren't going to put a hole in our Budget. You see, the line that has been run
by our political opponents is somehow we've got the Budget back into the surplus because we've used
the revenue from the resource superprofits tax. Well, that wasn't true and it wasn't a true a week
and a half ago when we said it wasn't true and it's not true as a result of seeing the accounts. We
can demonstrate that very demonstrate that very clearly. It's a package which all goes together, so
they are dependent upon the revenue from the resource superprofit tax. In relation to the
campaigns, and particularly I think the one mentioned by Karen was in the area of the environment,
given that we now don't have a CPRS, we're going to have to engage in more measures which relate to
individual energy to individual energy efficiency, we will just have to do that, which will mean
communicating with the Australian people about what more they can do in their daily lives over and
above what they're currently doing. So that's one part of it. The other part of it is to bulk up a
bit more some of these large-scale renewable energy projects. So we're setting to work on that and
that relates to that matter.

And the union movement?

Well, I think that's part part of workplace reform and I think if you go through other parts of the
Budget you'll find reasonably-sized grants. I'll let Julia deal with precise numbers there. I don't
have them in my head, but I don't think it's a big deal.

You said yesterday that what we didn't see was the money you didn't spend, that you were turning
turning ministers away. What would you have liked to have included in this Budget that you couldn't
due to your own spending limits?

Oh, that's a dangerous game Jane, because I'm now, along with Lindsay, you know we're bad cop and I
don't want to give any of those ambitious ministers that have got spending plans in the bottom
drawer, the opportunity to pull them out and think they've they've got me on side. Look, it is
terribly hard when you say to your colleagues who are really enthusiastic, have got really good and
interesting and new policy proposal s that make a lot of sense that you're just going to have to
buzz off. It can't happen, and that is difficult. But I'd like to pay tribute to actually the
Muirity of all of all of our ministers in this process. They all understood last year, and it was
pretty clear last year when we took the dramatic decision to support our economy, to stimulate it
in the way we did, speedily and powerfully, that there would come a time when growth returned to
trend, that we would be applying these rigid caps and that's what we've done. And, of course, the
bad news is they've been extended. extended.

Sorry to labour the point on the Building the Education Revolution Program, however it doesn't
surprise me that in political terms parents are delighted that they're getting new school
buildings, that people in utes converging on building sites are delighted that they've got jobs.
However, do you tell us today However, do you tell us today that there's no evidence abroad of
price gouging and that there is no question, genuine question over whether taxpayers are getting
value for money with this project and, is it the case that it doesn't matter whether taxpayers get
value for money, as long as you got the effect that you wanted from the effect that you wanted from
the stimulus?

Value for money is terribly important. I don't have any criticism of anyone who makes a criticism
based on a valid value for money argument, a valid value for money argument. But I've been around a
lot of these projects and, of course, I'm not an expert. I'm not a quantity surveyor, or any of
those other professions which have an input into the building industry. But what But what I do know
from getting around a lot of projects is that there's been a lot of good value for money in
projects I've seen. Now I also accept that if you do 20-odd thousand projects it is the building
industry and there will be some parts of it where things are not necessarily perfect, or where some
people have pulled a swifty. But we have had checks and balances in place for all of that and
because of some of the public discussion, we've put more into the system. But I think the truth on
the Building the Education Revolution will be that by and large in most parts of Australia there's
been a lot of value for money. But there, of course, was so many projects, there's going to be
areas where it isn't quite right, because it is the building industry. it is the building industry.

Just wondering how the Government is going to balance the shrinkage in bond issuance as the Budget
improves against new global rules that require banks to hold more Government bonds as liquid
assets?

Oh, this is... yeah, OK, this is the G20 discussion. I haven't received received an update on how
the discussions are going in this area, but we will not have an outcome as ministers or leaders to
look at in this area until, I think, earliest - and it may not even be then - the June leaders'
meeting in Canada. We may get an update at the next G20 Finance Ministers meeting, but but I can
say a few things about this, because it's very important. Basically the financial stability board
working with other agencies is doing a lot of modelling about the impact of various new rules.
We've not seen the outcome of that. When I spoke about these matters at the meeting in Washington
recently, I stressed that countries I stressed that countries like Australia which didn't have any
systematic collapses in our financial system understood that supervision was in many cases, just as
important as changes in regulation and changes in regulation did have to reflect different
circumstances in different nations. I believe that's a message that has been taken on board. It's
one of the reasons why the comprehensive modelling why the comprehensive modelling is being done.

The Government's taken the hit, not the Opposition for the failure to get the ETS through the
Senate. You've sort of said fairly pointedly this morning that if the mining tax doesn't get up,
then all the measures that are going to be funded by it are going to hit the fence, as well. What
thinks you will be able to prosecute that case anymore effectively than the anymore effectively
than the ETS?

Because there is a thing called the national interest and there's a thing called good policy, and
we've got to fight for it within the confines of what we can achieve and what we can make a reality
- that's what people elect us to do. They also tend to elect Senates which don't necessarily give
us the numbers and we've got to try our hardest to argue our case. That's what we do. After all, we
do live in a democracy. We're accountable to to the people and we're accountable through functions
like this and we've got to go out there and argue as hard as we can. I also reject the critique of
the Government that we didn't argue the CPRS hard enough. It's perhaps unfortunate that the very
strong policy process we had in place coincided with the impact of the global recession right
through 2009, but we put out a green paper, we put out a white green paper, we put out a white
paper, we put out modelling, we put out draft legislation and accompanying all of that was a pretty
strong discussion and debate. But I think a lot of it was washed over at that stage by other, more
urgent and dramatic events, which were going on in a global economy and, in fact, you could see
this reflected in what then unfolded in various G20 meetings. So there was a variety of reasons why
the momentum for all of that fell away. We, of course, always away. We, of course, always accept
responsibility for the fact that we didn't argue it as well as we could have, but we had a go. We
had a real red hot go, but it's just we didn't get there. We were days away from passage until the
leadership of the Liberal Party changed, so people ought to recognise that in the whole debate.

It is a sitting day, the Treasurer the Treasurer has a tight schedule as you'd appreciate. We might
have to make this next question the last.

This morning, the Opposition Leader likened you to a Paris Hilton big spender who's become Uncle
Scrooge, he simply doesn't believe it. Now the Disney version of Uncle Scrooge, had Scrooge McDuck
of course in a huge vault huge vault with piles and mountains of money, you might remember. Now are
you really, really saying to us that as the election approaches you won't get the shovel out and
put some of that mountains of cash you've got in there out into voters' hands and could it be - and
I'm just picking up on Laura Tingle here - the $2 million that you've got in the vault that maybe
could come out.

The answer to that is the same as I same as I gave to Escada, Christian Lacroix and Gianfranco
Ferre Laura before. -- the same as I gave to Laura before. In an uncertain international
environment and an environment where fiscal credibility counts for so much, the Opposition has
none. They can't say when they might bring the Budget back to surplus, they can't say what their
objectives are, they can't say how they're going to how they're going to get there. They sit up in
the Senate and knock back important savings measures and then say we haven't saved enough. They are
really a risk to this country, because they are so bad when it comes to the economy. Thanks very
much.

APPLAUSE Thank you very much, Mr Swan. We hope that renewing your membership will bring you back
again soon and that you'll have some cause for a celebration at some time in the near future. Thank
you very much. Congratulations.

Closed Captions by CSI

.

THEME MUSIC Welcome to Talking Heads, it's good to be with you again. This week I'm chatting to
can-do success story Wendy Harmer. It's fair to say that Wendy sprung off life's starting block
with some big challenges ahead.

I am here tonight on a mission from God. She has sent me along here...

CHEERING From comedy to a seven-figure salary on radio Wendy stepped into the spotlight. She's now
an author, playwright and mum. Wendy, welcome to Talking Heads.

Thank you, nice to be here.

Now, we don't usually pry into who our guests sleep with...

Oh!

Do you still sleep with Mr Squidgy?

(LAUGHS) Well, Mr Squidgy, as a matter of fact, has just been banished.

After how many years?

Ah...52 years. He got too lumpy. I think we should let people in on what we're talking about, don't
you think?

Yeah.

He's my pillow. He's my special pillow. I used to, when I first started doing stand-up comedy, even
cart him around the world. How sad is that? But I think I'm grown up enough now to put him in the
cupboard.

So you haven't thrown him away?

No.

That's very comforting. Your dedication to comedy came when you as a journalist went to cover the
new cabaret in Melbourne.

Well, the interesting thing was that there were quite a few male stand-up comedians there. There
was Richard Stubbs, I think, Mark Neal, Glen Robbins, Peter Rowsthorn. But there weren't any girls.
If I hadn't come along in the 80s to be a female stand-up comedian in Australia, someone would have
had to invent me. Bugger the romance, let's just get on with it. We're busy, for Christ's sake!

Wendy, as you were getting along, how much were you driven by ambition?

Oh, I think I was... I was driven by ambition. I think I still am. I think most people would know.
I don't know whether it's ambition for ambition's sake, though, or whether it actually comes about
proving something or chasing away demons. I don't think I ever wanted to be rich, particularly.

And when you say proving something, or chasing away demons, what did you have in mind?

(LAUGHS) Where would you like to begin? 'I very much started doing stand-up comedy because I wanted
people to look past the physical me, get to see what I had to offer. It was a tough life as a
child. Always being stared at.'

Wendy Harmer!

'In some ways I think that I got into show biz so I thought that if people were going to stare at
me I'd give them something to stare at. I was born with a bilateral cleft palate and cleft lip. I
remember coming home one day and saying to my mum, "Oh, the other kids are picking on me at
school." And Mum said, "Well, you go and stand in front of that mirror and when you can find
something to complain about, you come out and tell me." So I was never allowed to whinge about it.
My father was a rural school teacher, so we moved quite a lot. That meant that I was always in the
wrong uniform. (LAUGHS) The best thing of all was the fact that we lived in the school residence,
me and my three brothers and sisters. I used to love to actually go through other kids' desks after
they'd gone home. I was a bit rebellious about it. Every morning we'd lined up and Dad would be
there saying, "Good morning, children," and everyone would say, "Good morning, Mr Brown," and under
my breath I would say, "Good morning, Dad." I made myself a little challenge to try and read the
school libraries from A to Z. I loved The Faraway Tree, The Folk Of The Faraway Tree, The Wishing
Chair. What little girl didn't? Mum is a very, very gregarious sort of person, and it was a real
shame that she felt that she couldn't cope and had to leave the family. I was about ten then. What
happened was that Mum had four children really young. She was only 17 when I was born. And she was
living way out in the bush, really, in this little school, and it was just too much. You know how a
lot of people think that there's a man in the moon? I always used to think that my mother was in
the moon.'

So seeing Mum in the moon - that's a long way away.

Yeah, it was a long way away. When Mum had a nervous breakdown and left our home, I didn't see her
again for six years. She used to write a lot to me, and send poetry and things like that, but I
didn't see her in person again for six years.

And you became the new mum?

Well, I used to be able to pride myself on how quickly I could iron one of my father's shirts for
school. You know, I can't remember now...

Three minutes.

Yeah, well, probably a minute and a half.

(BOTH LAUGH)

But yeah, I guess that I did... ..I did feel very much the mum in that situation.

To your younger siblings?

Yeah, that's right. Of course, they took no notice of me.

How big a hole did all that leave?

I, at the age of about 30, I was in a relationship that broke up with someone that I loved a lot,
and it all came back to me, and it was all these... ..they call it the psychic wound, I suppose,
about being abandoned. And so it became a very big motif. Unfortunately for that boyfriend I did
write a stage show and a book and a novel about it.

You got some value out of the relationship.

Some value, but actually, my second novel, Love And Punishment, tells the story of that time,
really, and links those ideas of broken families and not being able to make good relationships in
the future. So it was a very interesting area for me to explore.

When mum and dad break up, kids often, often blame themselves.

Yeah.

Did you?

Yes. Yeah, I think so. My brother Noel has a cleft palate as well, a single cleft palate as well,
and I think that we both took it pretty hard. We thought that if we could have been better that
things wouldn't have been as fractious as they were and maybe Mum wouldn't have had to leave. I
think that's, yeah, very much something that I carter around with me.

Your dad was really working on you at the time. He...he thought that you were a project, in a
sense.

(LAUGHS) Yes, he did think I was a bit of a project.

# There's a star in the east... #