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KIERAN GILBERT: Joining me this morning our Monday morning panel, Liberal Parliamentary Secretary
the Shadow Parliamentary Secretary, Mitch Fifield, and in Sydney Labor Parliamentary Secretary for
Government Service Delivery, Senator Mark Arbib.

Gentlemen, Thanks for your time.

Senator Arbib, it looks like the tax cuts as promised will be going ahead?

MARK ARBIB: Well Kieran, I'm not going to surprise you when I say I don't know what's in the
budget. This is a dance, this has been going on for a long time and I can't speculate. I wish I
could, I wish we could sit here and talk about it all morning but I don't know and I really can't
put that out there.

What I can say is, and this is something you've heard often, this is the toughest budget any
Treasurer's had frame since the great depression. We have revenue going through the floor, they're
talking about 50, 60, $70 billion worth of revenue that has just plummeted from the global
recession and also from our trading partners having a down swing and the end of the mining boom.
And that's going to put huge pressure on the government, huge pressure on the budget. There is no
doubt there is going to be a temporary deficit, there is no doubt about it at all and the Treasurer
has said that.

The real question here is, and this is a big debate that's going now is; what will Malcolm Turnbull
do? Malcolm Turnbull has been saying that, attacking us on cash splashes, attacking us on debt and
deficits. But, what will he do? Will he borrow? Because this is the big question if we're losing
$115 billion in revenue over four years, well, that leaves the government in a terrible situation
but it also means the Opposition are going to have to make some pretty tough choices themselves.
Are they going to cut program, are they going to cut spending, are they going to raise taxes or are
they going to borrow. And he's already once, already been once been stung on this on Meet The Press
when he didn't deny that they would borrow $177 billion, so that's a big, big question for Malcolm
Turnbull and also Mitch Fifield.

KIERAN GILBERT: I know you're trying to put the blow torch on the Opposition and obviously
distracting from the difficulties that the government is facing, but really the blow torch in the
next week as you know is going to be well and truly on the Treasurer and his challenge you would
concede is a difficult one in terms of balancing the messages because he's got the short term
spending plan, but yet, you still want to be true to the promise that the Prime Minister made in
the advertising and the lead up to the election and since that he's an economic conservative so
you're providing that road map back to surplus. So how important is getting that message out there,
that balancing act between the spend but then the longer term discipline?

MARK ARBIB: Well there is no doubt this is a very tough budget to frame because on the one side
obviously we've got the revenue, $115 billion over four years, $50 billion or $60 billion this year
of revenue lost through capital gains tax, company tax. At the same time as that, we must continue
to stimulate the economy, this is a strategy that has been pursued by the government from day one,
we acted early, we acted decisively and we must continue it. And the Treasurer spoke yesterday
about infrastructure being a major focus of the budget and a major focus of the stimulus package
and it is. 70 per cent of the stimulus package is in infrastructure, nation building infrastructure
and that is where we're headed. So, in terms of our spending priorities I expect it will be to
stimulate the economy but at the same time as that, we remain economic conservatives. We don't like
going into deficit, we don't like having to borrow. So over time we must get the budget back over
the long term and the medium term back into surplus and that is why it is a difficult balancing act
for the Treasurer, difficult balancing act for the government. But Kieran I know, I know you didn't
sort of take it across to Mitch. But it is an important question that Liberal party has to answer
because they have been running scared on this one, will they borrow to make up the short fall for
the loss of revenue or will they cut services. It's an important question and it's about time
Malcolm Turnbull came up with some answers.

KIERAN GILBERT: Well Senator Fifield, the Coalition well it's in Opposition of course but the fact
is if you were in government you'd still face the same revenue write downs, enormous revenue write
downs due to the recession. I think there's only a 20 or $30 billion difference between the two
sides in terms of what the debt would be. So, there's a point there isn't there that you're banging
on about debt but really the Coalition if it was in government it would be in debt as well?

MITCH FIFIELD: Well firstly, can I say Kieran despite Mark's best efforts this budget isn't about
Malcolm Turnbull or Mitch Fifield for that matter but I'll address your question. We would have had
a very different starting point, we got to be clear about that. And let's remember this government
drove the budget into deficit, this government drove the budget into deficit on the basis of policy
decisions alone. Go back to the budget updates last year and you'll see that it was policy
decisions by this government that took the budget into deficit in the first place. The reason I say
that we also would have had a different starting point, is that this government spent the best part
of 2008 talking the economy down and I've got no doubt had we been in government in 2008, growth
would have been stronger and revenues would have been higher. So, I won't accept that our starting
point would have been the same as Labor's. But can I say that I'm absolutely astounded at the start
of the program today that Mark couldn't address the basic question of whether this government will
honour its election commitment in relation to tax cuts. Mark couldn't answer the question in
relation to tax cuts which have been promised at the election. Tax cuts which have been budgeted
and tax cuts which have been legislated. This budget isn't about the Opposition. This budget isn't
about Malcolm Turnbull. This budget is about the government. This budget is about whether this
government will honour some basic election commitments such as; the tax cuts which have already
been legislated whether this government will honour its commitment to keep the private health
insurance rebate intact and whether this government has a plan for repaying its debt and whether
this government will ever deliver a budget surplus. Wayne Swan couldn't answer that question
yesterday, they're the things for this government to address.

KIERAN GILBERT: But Senator Fifield there obviously, in a different economic. Senator Fifield in a
very different economic environment you would expect though that there are going to have to be some
spending changes, they're going to have to rein in some of the previous government provisions.
That's obvious isn't it? I mean given the enormous amount of revenue that's wiped off the bottom

MITCH FIFIELD: Well those are matters for this government to justify. It's not for the Opposition
to defend that scenario that you're putting Kieran. They're the government, this is their budget.
They've been in office for almost eighteen months they took the economy down in 2008. They've made
billions and billions and billions of dollars of commitments. They have to make the books balance,
it's not our job to do that, it's their job to do that. They've made election commitments. They've
made some appalling decisions such as the $42 billion stimulus package. It's not for the Opposition
to account for this government and their spending and their debt, that's something for Wayne Swan
to do in the budget.

MARK ARBIB: But, but ...

KIERAN GILBERT: Senator Arbib, I want to ask you about the point that Mitch Fifield makes there in
terms of the tax cuts. They were promised have been for some time. One, why can't you give a
definitive commitment on that today?

And secondly, on the maternity leave scheme, is there some hope that there will be at least
movement towards something which has been a cause that many in your party have been pushing for
years if not decades, will there be some move in that direction in this budget as well?

MARK ARBIB: Well Kieran I said this at the start and Mitch sort of glossed over it. I don't know
what's in the budget I haven't seen any of the details so it's hard for me to answer on something
that may or may not be there. The tax cuts are legislated, Mitch did make that point and I think
the Treasurer did make that point yesterday as well. In terms of paid maternity again, who knows.
This is something that most of us in the Labor party if not all of us in the Labor party are deeply
committed to and certainly there is a productivity commission report into it. It's something that
we are very, very committed to. The question about the budget though and whether it's going to be
in the budget is something really, I couldn't tell you and at the same time as that the Treasurer
said there has to be reprioritisation in some areas and it's going to be very difficult. The global
recession has been like a wrecking ball into our government revenue and it's making it very
difficult for everything we're doing in terms of the budget.

I mean, just listening to Mitch though, just to come back to him for a second on that, I think he
spoke for about two minutes and didn't mention the global recession once. If you listen to Mitch,
all the economic problems that the world is having that the country is facing at the moment is our
fault, the governments fault, I mean he also omits that he supported, he sat in Canberra in the
same, next to where you are right now Kieran, and he supported the first stimulus package. He
supported the cash payment to pensioners, he supported the cash payments to veterans, to families.
He supported the first home buyers grant going up from $7000 to $14000 to $21000 and this is
something that the duplicity on the Liberal party on this where they talk about cash splashes but
at the same time they supported it in the first place, and the stimulus package is delivering.

You look at what Westfield their March figures, up 1.4 per cent. Where in the world is retail going
up by 1.4 per cent. There is no doubt that the stimulus package is had an effect, in terms of the
stimulus payments and it will have a bigger effect now that we move into the infrastructure phase.

KIERAN GILBERT: But you know there are suggestions today in the Financial Review, they've done some
analysis on the Treasurer's correspondence with his state colleagues in the last week and that is,
that the deficit now could be up around $70 billion. Do you think that that's a realistic number? I
know you've said to us that you can't comment what's in the budget on the numbers you haven't seen
them but I mean, that is quite a substantial deficit to be trying to claw back over the next few

MARK ARBIB: Well if the deficit is that big then the reason for it is really the loss of revenue
from the global recession. We've seen the end of the mining boom. I mean we had twelve years of
boom and mining lead the way. That is now over, you've seen, if you look at the price for coking
coal I mean the prices for our commodities have more than halved in many cases and that has led to
a loss in mining royalties, that has lead to a loss in capital gains tax, a loss in company tax and
that is really been a wrecking ball through the governments budget.

And again the Liberal party they aren't in government you're right about that Kieran. But at the
same time as that, they are running a very, very duplicitous scare campaign on debts and deficit
and they have to come clean. Would they borrow to meet up for the revenue shortfall caused by the
global recession? Would they cut services, or will they raise taxes? That's the question for the
Liberal party. We'll be clear it will be in the budget but they're going to have to answer it.

KIERAN GILBERT: I'll put that to Mitch in a second. But in terms of the messages that are coming
from the government, undoubtedly are going to be an issue that the budget deals with as well. When
on the one hand you're handing out money as you did earlier in the year and last year with the cash
handouts and on the flip side you're going to say people have got to rein in their spending and so
on, further down the track their going to have to tighten their belts. It seems that a lot of
speculation about tightening middle class welfare. They're two very different messages that you are
going to be sending out to people.

MARK ARBIB: Our messages on the budget are pretty clear. We need to continue to stimulate the
economy, there is no doubt about it that is our economic strategy. We've had the stimulus payments,
we're now moving into the infrastructure phase. 70 per cent of the stimulus packages I've said is
on infrastructure and that is important. This is going to not just sustain jobs and employment in
the short term, you know stimulate small business. What it's going to do is prepare the country for
the long term. I mean, Mitch says and you listen to Malcolm Turnbull and they say it's not economic
infrastructure, that is absolute rubbish, absolute rubbish. We are spending on roads, we are
spending on ports, we are spending on rail. I mean in terms of rail funding we are spending more on
rail in eighteen months than they spent in twelve years. At the same time though as the point you
make Kieran is right, the government must balance that off in the long term and the medium term, in
terms of surpluses and deficits. We are still economic conservatives. We support surplus budgets
but it would be irresponsible absolutely irresponsible if we hadn't had taken the spending stance
we have in terms of the stimulus package. We would be forcing people out of work, businesses would
be shutting down if we hadn't of done what we've done. In the long term though there is a
recognition that we must, must move back into surplus.

KIERAN GILBERT: Okay. Senator Fifield isn't a fair point, and one I mean you've worked for the
former Treasurer Mr Costello, you know how this stuff works. With the deficit aren't we just seeing
the automatic stabilisers at play here, we've had this argument about the D word. But aren't you
and the Opposition leader continuing to try and demonise the idea of a deficit when really when you
look across the OECD, across developed economies, advanced economies we have one of the smallest
deficits there is at the moment. Isn't this just an automatic stabilizer at play given the

MITCH FIFIELD: Well the reason Australia has relatively one of the smallest deficits is because we
paid down all of Labors' $96 billion debt, we handed Labor a $22 billion budget surplus, that's the
reason why we're in a much better fiscal position than almost any other country in the world. It's
no thanks to Labor at all, that's the first point to bear in mind. The second is, you know of
course revenues are going to fall during an economic down turn, we accept that, we've never denied
that but what we don't accept is that our starting point at this budget if we were the government
would have been same as this government's. Clearly it wouldn't have been because we would have
managed the economy differently over the last eighteen months that would have had an impact on
revenues no doubt. And also we wouldn't have spent $42 billion with absolutely no economic benefit
to show for it. So, our starting point would have been different in terms of growth. Our starting
point would have been different in terms of the revenue numbers and our starting point would have
been different in terms of the budget bottom line. So, it's extremely unfair to say in effect if
you were the Labor government and if you'd been managing things this badly would you handle the
budget the same way that they're proposing. We're not the Labor party we would have handled the
last eighteen months differently and Australia would be a much stronger budgetary position had we
been in office and I think the economy would be growing a bit better had we been in office.

KIERAN GILBERT: Okay gentlemen we are going to pause there, take a break and after the break on AM
Agenda we are going to look at the reaction in China to the governments new Defence White Paper.


KIERAN GILBERT: Welcome back to AM Agenda. And with me this morning the Labor Senator Mark Arbib
and the Liberal Senator Mitch Fifield.

Senator Arbib, I want to put to you the reaction to the governments Defence White Paper announced
on Saturday a Chinese military strategist in this morning's Sydney Morning Herald is quoted as
saying "this is a stupid crazy idea from Australia, I'm very concerned and worried about it" it's
not the best reaction is it, to the government,s military strategy out of Beijing?

MARK ARBIB: Well it's quite interesting I read that article and you sort of take that from the top
part of the article but when you read right down to the bottom, and you actually get his last
quote. He was not concerned about the scale or the size of the White Paper's build up, the build up
in terms of the Defence Force. He's talking there about some of the paragraphs in terms of China
and hopefully, hopefully the Chinese government are not seeing it that way because this White Paper
is not directed nor is it focused on one country or one threat. It talks about threats and
challenges at multiple levels not just now, not just in the short term but in the long term,
because this is a document that goes right up to 2030 and as a country and as a government we have
to be prepared for any contingency in terms of defence and national security and that's the most
important job that any one government can do. And the last White Paper was ten years ago, a lot has
changed in ten years. We've seen international terrorism, you've seen resource security. You've
seen a proliferation of weapons of mass destruction, the nuclear threat. There is a lot going on,
and at the same time as that you've seen a build up and a modernisation of defence forces in the
Asian-Pacific region and Australia must be prepared for anything that could come our way in the
future, not just with our allies and when we make a lot of references to the United States. But
we've got to be self reliant in defence, I mean that is something that the government is definitely
working to through the White Paper.

KIERAN GILBERT: Well doesn't this show then that the messages were a bit sloppy in the White Paper.
If this is the reaction you've got from China, doesn't it show that the messages within the White
Paper could have been a bit clearer if that is your aim?

MARK ARBIB: Well this is a comment in the Sydney Morning Herald you're referring to which is from
one defence planner, one former admiral I think whose made these comments I think, it's not from
the Chinese government. And as I said, this White Paper is not focused on any one government at
all. It talks about multiple threats across the whole region and obviously I mean, we've all seen
and the Prime Minister has talked about a modernisation and an increase in the armament in the
Asia-Pacific region. You would have to be blind Freddy not to have seen it and it's something as a
government we must to be prepared for. There is no direct threat from China.

KIERAN GILBERT: Okay. I just?on one final issue Mitch Fifield in the Australian newspaper Glenn
Milne reports that a business donors to the Liberal party want a renewal of the Liberal
parliamentary team, they want out of the likes of Kevin Andrews, Philip Ruddock, Bronwyn Bishop,
Bill Heffernan and they want a renewal according to these business donors quoted by the Australian
newspaper. Is there room for renewal in the Liberal party and does Malcolm Turnbull, need to do it?

MITCH FIFIELD: Kieran any individual and supporter of a political party, be they in business or not
is entitled to their view about the relative merits of individual parliamentarians. We are
fortunate in the Liberal party that we're not subject to any sectional interest unlike the Labor
party where it's the unions who pick the candidates ...

MARK ARBIB: Oh come on Mitch.

MITCH FIFIELD: ... And in the Liberal party it's our organisation who pick the candidates, not anyone
external to the party organisation. But we have had significant renewal in the Liberal party. We've
had some great new talent come in at the last election, Scott Morrison, Scott Ryan, Simon
Birmingham, these are talented young people who have a great contribution to make and I think we've
renewed and will continue to renew.

KIERAN GILBERT: Should there be more though, should there be a cleaning of the slate some of those
Howard era people?

MITCH FIFIELD: Well renewal is an ongoing process and it happens election by election and it's the
decision of the preselectors. They make the calls, and the Liberal party won't be subject to any
outside influence on that subject unlike the Labor party.

KIERAN GILBERT: Okay. Senator Fifield, Senator Arbib, thank you very much as always this morning we
look forward to chatting to you on the eve of Wayne Swan's second budget it should be a fascinating
week ahead.

MARK ARBIB: Thanks, Kieran.

MITCH FIFIELD: Seeya, Kieran.


KIERAN GILBERT: That's all for this edition of AM Agenda, don't forget to join David Speers this
afternoon at 4.15 eastern time for PM Agenda. For now I'm Kieran Gilbert thanks for your company.