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Early Agenda -

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Interview with Kieran Gilbert

Sky News AM Agenda

11 May 2009

SUBJECTS: 2009 Budget, Pension Increase

GILBERT:

It's a good morning and welcome to Treasurer Swan. Thanks for your time. A vote of confidence there
from your mother-in-law. That's a good start.

TREASURER:

She keeps me up to the mark, I tell you.

GILBERT:

Onto the serious stuff today, Access Economics is warning that there are going to be budget
deficits for as far as the eye can see unless politicians on both sides show courage. Have you got
the courage to make the cuts needed for $25 billion that Chris Richardson at Access is talking
about?

TREASURER:

Well, there's no doubt that there will be tough decisions in the Budget tomorrow night. And there's
no doubt that because of the global recession, the extent to which growth has contracted, and very
substantial revenue write-downs in excess of $200 billion over the forward estimates that have been
imposed on this country, we have to take tough decisions. And it's a complex situation. We have to
stimulate the economy now to support employment. We have to make room for vital investments and
also for pensions. But also, we've got to make those longer term savings that bring the Budget back
to sustainability over time given the new global circumstances.

GILBERT:

But what Access is talking about is $25 billion a year. I mean, that's some big cuts. Have you got
the courage to do that?

TREASURER:

Well, we've got the courage to face up to our responsibilities in this Budget, because there's a
situation where we've got a global recession, plus we've got the unwinding of the mining boom all
happening simultaneously. Now, the previous government had endless revenue flowing from the mining
boom and even in that period they couldn't find room to do something about the base rate of
pension, or to do something like make the basic investments in infrastructure. So, we have to take
tough decisions in this Budget to make room for those vital nation building investments, but also
to make the Budget sustainable for the future given the new global reality. Because you see the
mining boom is not coming back, and the global growth that we will see as we come out of this
global recession will not be like the global growth that we saw over a year ago.

GILBERT:

Yesterday, talking to Laurie Oakes on the Nine Network, you said the Opposition can't pretend that
it's for a pension increase and then turn around and block savings that are going to fund that
pension increase. That sounds like, are you going to tie measures like the reining in of the
private health insurance rebate to this commitment?

TREASURER:

We'll cross that bridge when we come to it, but I want to make this point: that when you make a
commitment to increase pensions and to give single age pensioners a decent standard of living, then
that goes on and it's a permanent expenditure from the Budget. And given the context of an ageing
of the population, it certainly does impact upon the Budget for a long time, and that means that we
have a responsibility to make long-term savings. So, the Opposition on the one hand can't be out
there saying they'll support a pension increase, and then knock back the savings that make that
pension increase sustainable for the long term. They can't have it both ways.

GILBERT:

But it's not just the Opposition. The Independent, Nick Xenophon, says it's a broken promise if you
rein in the private health insurance rebate. He also backed the pension increase. Would it make
sense to tie the two things together?

TREASURER:

There will be tough choices for everybody in this Budget, because simply everybody has to do their
bit. Everybody has to do their bit in this Budget given the global recession, given the impact it
has had on government revenues, and given the commitment that we've got to make room in the Budget
to do something for pensioners to give them a fair go and to make that pension sustainable for the
long term.

GILBERT:

But you've also got to get it through the Senate, don't you?

TREASURER:

We certainly do, but everybody has got to live up to their responsibilities here. We are in very
complex and difficult circumstances imposed on this country by the rest of the world. That does
mean tough decisions, and if we are to give pensioners a fair go and to make that expenditure
sustainable, it does mean some tough decisions about savings. And everybody has to face up to that
- not just the Senate, the whole of the community.

GILBERT:

You announced a parental leave scheme means-tested for the primary care giver for those earning
under $150,000 for the primary care giver. But if their husband is on $300,000 a year and the
primary care giver is on $100,000, they still get that...

TREASURER:

Well, it's means tested and it's the only way you can do it. It is means-tested on the primary care
giver because it is a work-related benefit. That's what it is, and it's the only way to go about
it. We think it's a modest scheme. We do recognise the reality of the global recession at the
moment and the need to set this up administratively, and that's why we've delayed its introduction
until the beginning of 2011.

GILBERT:

Is that a sign of things to come? That you will be delaying any spending increases to 2011 when the
economy kicks back into gear?

TREASURER:

I wouldn't read anything into that particular decision. But suffice to say, given the circumstances
that we have, that the globe has imposed upon us such a huge revenue write-down, it does mean that
everybody has to do their bit, and not everything that everybody wants will necessarily come to
them in the way in which they want it.

GILBERT:

Are you concerned that some businesses that might have been considering paid maternity leave will
now scrap the plans because you've covered that...

TREASURER:

No, I most certainly am not. Paid maternity leave in the private sector is skewed to generally
those on higher incomes. This scheme will be very beneficial for people on low to middle incomes
who by and large haven't got, and are unlikely to ever get, paid maternity leave in their course of
work.

GILBERT:

So you think businesses will do it anyway?

TREASURER:

I think what we need to do is to put in place a scheme which is principally beneficial for those on
low and middle incomes who will never have the prospect of securing this in the private sector.

GILBERT:

We've seen some positive numbers in recent days. The retail trade figures up last week, the jobless
rate down. The stock market has climbed in recent months as well. Is there any prospect Australia
could stay out of recession?

TREASURER:

Well, certainly in the case of the retail figures they are encouraging, but what they reflect is
our economic stimulus and its impact in the community and its support for jobs and for businesses.
But as regards the forecasts which will be published tomorrow night, I'm not going to speculate
about those.

GILBERT:

Okay, we'll wait for that. We know much of what's in the Budget. There's been a lot of well-sourced
leaks. Can we expect any surprises?

TREASURER:

This is a very big Budget. There are big challenges ahead, and there are decisions in this Budget
which I think will set the course of the future and put this economy on a sustainable path.

GILBERT:

No surprises?

TREASURER:

Well, we'll have to wait and see.

GILBERT:

What's your message to those on middle-class welfare? People who, you've said everyone's got to do
their bit. But do you have any message for those people who've become used to these things as an
entitlement, now are going to lose them?

TREASURER:

Well, it is the case that the previous government at the top of the mining boom did spend
relatively freely, and we know that because Mr Costello has said that himself in Mr Howard's
biography. So, we do have to pull our horns in a bit. We will have to rein in expenditure.
Everybody will have to do their bit, and some people will have the capacity to do more than others.

GILBERT:

Treasurer, Wayne Swan, appreciate your time. Thank you.

TREASURER:

Good to be with you.

Kieran Gilbert: Welcome back to AM Agenda and good morning to our panel, Labor Senator,
Parliamentary Secretary for Government Service Delivery, Senator Mark Arbib. Good morning, Mark.

Mark Arbib: Good morning, Kieran.

Kieran Gilbert: And Liberal Senator Mitch Fifield, Shadow Parliamentary Secretary. Good to see you,
too, Mitch.

Mitch Fifield: Good morning, Kieran.

Kieran Gilbert: About the maternity leave scheme, the parental leave scheme's up and running.
What's the Coalition going to do about it? Do you like what you see?

Mitch Fifield: Well, it's important to look at what Labor has actually done since they've been in
government in relation to new mothers. What Labor have done is to means test the Baby Bonus and
means test Family Benefit part B. What was announced yesterday by the Treasurer is just an election
promise. It's not proposed to take effect in 2009, not proposed to take effect in 2010. It's
proposed to take effect 2011 after the next election. So what this is is an election promise and we
know how much stock Labor put on election promises. Labor put their hand on their heart and
declared that they would defend the private health insurance rebate; that they would defend the
medicare safety net and the Prime Minister said that they wouldn't change superannuation
arrangements. Not one jolt, not one tittle. Yet, by the sound of things, all those are going by the
boards so we can't have any faith at all that Labor will deliver on this which is nothing more than
an election promise.

Kieran Gilbert: It is beyond 2011-that the promise is beyond 2011, isn't it? So it's beyond the
next election.

Mark Arbib: But can't Mitch just be positive for once. Look, here we are, one of two nations in the
OECD that don't have paid parental leave. Finally the Australian government is taking action on it.
They had 12 years to do something about it, didn't do anything about it. We are doing something
about it, we are acting. Here it is. Parents are going to benefit, working families are going to
benefit. Rather than just being positive and saying it's a good thing, we'll support it or think
about it, let's have a look at it. Here we go, Coalition once again just knocking it. So this is
the way that they react to everything. They are negative on everything we do. You guys think, you
are just basically ...

Mitch Fifield: We're saying you've got form, you've got form is all we are saying.

Mark Arbib: You think you are born to rule. You think you are a de facto government.

Mitch Fifield: Not at all. You've got form. Labor fib.

Mark Arbib: This is the right decision for parents. It is in the end. The immediate time after a
child is born is the most stressful for any parents. We know that, we've got kids. Very stressful
and the last thing you need to worry about is where the income is coming from. This should have
been done many years ago. It's taken too long. The Treasurer, the Prime Minister have made the
right decision. It's a good thing, a good thing for the country and it's a good thing for families.

Kieran Gilbert: And the fact that it's been delayed to 2011, that does give the government some
room to move, doesn't it? In terms of the spending and this looks like it will probably form the
model for other spending initiatives in this Budget? That they will wait to the economy kicks back
into gear in a couple of years?

Mark Arbib: Well, it is responsible and given that the global recession has put a wrecking ball
through our government revenue, you know, two thirds of the deficit coming forth will be from
revenue down writes. It's a good thing that we are actually being responsible with all of our
spending and that's why we are looking at the Budget. Short term stimulus, but long term savings
and to ensure that we come out of deficit in the future.

Kieran Gilbert: That makes sense, doesn't it, Mitch? To rein in the spending in the medium term, to
have that road map back to surplus. Chris Richardson at Access says the politicians on both sides
of the fence need courage to deal with the spending cuts needed and it sounds like the Treasurer's
going to be following that path?

Mitch Fifield: Well, I don't think Labor are going to be reining in spending. You know, we've heard
that the Treasurer say that they're going to fund various things through savings measures. This
isn't a Budget which contains new measures which are funded by savings. This is a Budget which is
built on borrowings and built on debt. We shouldn't be in any doubt at all about that. This
government has no plan for getting the Budget back into surplus. We hear the government talk about
the concept of a temporary deficit. A temporary deficit is 6 or 7 years. I heard the Prime Minister
say the other day, started talking about temporary borrowing as well. Now the borrowing that's in
place would be in place for at least 20 years so this government has a funny definition of
temporary. A government having a major debt of something of the order of 200 or $300 billion being
temporary...

Mark Arbib: Here comes the scare campaign again.

Mitch Fifield: It's not a scare campaign ...

Mark Arbib: It is, well Mitch ...

Mitch Fifield: Because it's the facts and the facts are scary. You know, this government has no
plan to bring the Budget back into surplus.

Kieran Gilbert: Well, in terms of the debt, it's true that $200 billion has been wiped off due to
the global effects of the recession, but close to a $100 billion on top of that is government
spending so they've got a case, at least a third of-or around a third of the debt is from your own
doing.

Mark Arbib: Well, let's wait and see what the figure show, but in terms of the deficit we know,
Treasurer has said two thirds is being wiped off by revenue crashing through global recession, the
end of the mining boom. That's fact. In terms of that now, I mean, Mitch can run his scare campaign
...

Mitch Fifield: They are facts, and the facts are scary.

Mark Arbib: ... and Malcolm Turnbull can run a scare campaign but the truth is they are going to have
to borrow as well. They know it and if they are not going to borrow, if they are not going into
deficit, what are they going to do? Are they going to increase taxes, or are they going to cut
programs, cut spending? That's a question that Malcolm Turnbull's going to have to answer when he
gets up on Thursday night. Mitch knows it. They are running a scare campaign. It's duplicitous. In
the end, Malcolm Turnbull has already said that their spending, that they'll be borrowing some like
$177 billion.

Kieran Gilbert: How is it duplicitous if they're going to spend less, if they are-I mean, if they
still have a debt & deficit, fine, but if it's a lot less than yours, how is it duplicitous?

Mark Arbib: Well, because they are running a dual line here. Turnbull has had to admit it under
pressure but at the same time as that they are happy to run the Mitch Fifield scare campaign on
deficits. They know there's going to be very little difference in the end when you look at our
deficit compared to their deficit. Because the truth is, it's been caused by the global recession,
by the end of the mining boom, and as the Treasurer said this morning. I mean when you look at the
spending that the Coalition racked up, if you talk about spending, talk about spending the
Coalition racked up in their 12 years in office. So bad that your former boss Peter Costello was
saying he didn't think it was sustainable. John Howard's spending was not sustainable. He was
worried about footing the bill. Well, footing the bill is what we have to inherit. We've inherit
footing the bill from the spending you put in place in your time in office and that was during the
mining boom.

Mitch Fifield: This is absurd, Kieran.

Mark Arbib: It's not absurd. It's true.

Mitch Fifield: This is absurd and what Wayne Swan was saying on the front page of the Australian
this morning is absurd that the Budget situation which the government faces is partly as a result
of the spending of the previous government. This Budget apparently and its framing is nothing to do
with this government. The difficult circumstances, all the faults of the global financial crisis
and the previous government. How could it be the fault of the previous government when the previous
government repaid $96 billion of Labor's debt ...

Mark Arbib: Sold Telstra to do it.

Mitch Fifield: ... and when the previous government handed this administration a $22 billion surplus.
It's the most absurd thing I've heard in a long time that the budget situation today is somehow the
fault of the previous government.

Kieran Gilbert: But during the boom, the middle class welfare did blow out, didn't it? There wasn't
means testing on anything.

Mitch Fifield: Well, it's interesting. At the last election, Labor committed to the private health
insurance rebate, they committed to superannuation reforms which we'd introduced, they committed to
our family tax benefit arrangements. Labor didn't have that view at the last election. Labor put
their hand on their heart at the last election and said that all of those were good things. Now all
of a sudden Labor is saying don't believe us at the last election, believe us now. The truth is,
you can't believe a thing this government says.

Kieran Gilbert: The Prime Minister has made a big deal of honouring his election commitments. He
did say last year and the last Budget and it was a big priority of him but this recession has seen
that go by the wayside, hasn't it?

Mark Arbib: No, I mean this is something the Prime Minister is deeply committed to.

Kieran Gilbert: But there are a lot of promises that aren't being honoured.

Mark Arbib: But at the same time there's that ...

Mitch Fifield: They're being broken, Mark.

Mark Arbib: we've got to see what the Budget shows tomorrow night, but at the same time there's
that no one could have imagined how big an effect the global recession has had on our bottom line
and on our revenues. It is just absolutely been a wrecking ball through the government, through the
Budget. At the same time can I just come back to something Mitch said. He talked about paying off
debt. He forgets the way the Coalition paid off some debt was that they sold Telstra and at the
same time they underinvested in infrastructure. Took 10 per cent of GDP in terms of infrastructure.

Mitch Fifield: Not true.

Mark Arbib: they underinvested in hospitals, a billion dollars out of the hospitals and the health
system, underinvested in education, took 5 per cent off education. The only country in the
developed world that was actually devesting in education was Australia. You look at it ...

Mitch Fifield: Not true, after playing down that we invested the proceeds of Telstra.

Mark Arbib: We were taking money out of the education system, taking money out of education. That
was the previous government. That was what they did.

Mitch Fifield: Labor spent the proceeds of the Commonwealth Bank on day to day spending.

Kieran Gilbert: Let me just ask you, let's look forward now and I want to ask you about this
Budget, the deficit spending. Really it seems to me that the arguments are that the margins on the
deficit when it comes to the focus of it, one being that it's a cash splash which was a third, then
you've got two thirds being spent on infrastructure. You're arguing for it to be spent on
infrastructure, what's your problem with two thirds of it going in that direction, a lot of it
rolling out as we speak?

Mitch Fifield: Well, when you say it's two thirds, look at the $42 billion stimulus package. Two
thirds of that wasn't on infrastructure. A little bit of infrastructure that that money went on ...

Mark Arbib: Yes it was. $30 billion of it went on infrastructure.

Mitch Fifield: included school halls. Well, school halls are important but school halls are not
serious economic infrastructure in the way that roads are. $42 billion package, not one new road.

Kieran Gilbert: They create jobs though, don't they? The schools and that sort of work.

Mitch Fifield: Yeah, it's short term. It doesn't go to the long term productive capacity of the
nation and that's what we've been arguing for all along.

Mark Arbib: Mitch, that is just absolute rubbish and I mean it's amazing you will actually come
here and say that given the Coalition supported the first stimulus package. You supported the first
stimulus package which had ...

Mitch Fifield: We gave you the benefit of the doubt.

Mark Arbib: ... which already had ...

Mitch Fifield: We did, and we won't make that mistake again.

Mark Arbib: Which already had infrastructure in it, first home buyer's scheme, money for
pensioners, money for carers. You supported that.

Mitch Fifield: Because we've been arguing for money for pensioners and carers. That was our agenda.

Mark Arbib: Let's just get down to infrastructure. The second stimulus, 70 per cent of it, almost,
70 per cent of it was infrastructure and in terms of it ...

Mitch Fifield: Bike paths. Don't tell me bike paths are serious economic infrastructure, Mark.

Mark Arbib: ... and I cannot believe you that you would be criticising money going into schools. Part
of my role in terms of getting around as Parliamentary Secretary is actually insuring the stimulus
gets to the schools and can I tell you I've not met a parent, a principal, a school community that
hasn't been ecstatic by the infrastructure coming in. We are talking about new class rooms, new
halls ...

Mitch Fifield: It's all about the balance. It's all about the balance and there wasn't balance in
that package.

Mark Arbib: We are talking about new science labs, new language labs and if you are saying that
investing in education is not productive for the future ...

Mitch Fifield: Come on, Mark.

Mark Arbib: ... then you are absolutely so out of touch and that is ... this is the modern Liberal
party.

Mitch Fifield: Mark.

Mark Arbib: They think investing in education is not about the future. Mitch, you're out of touch.

Mitch Fifield: School halls does not 'inaudible' infrastructure make...

Mark Arbib: I think he's made the point clearly today.

Kieran Gilbert: Okay, let me ask you something about the pension increase and what do you think the
Treasurer-he wouldn't answer it this morning-but doesn't it make sense to tie the revenue measures
to this increase because this is something the Coalition does support, the increase to the pension.
It's going to cost around $4 billion dollars over four years, you are going to have to fund it, so
why not tie the other measures, controversial measures like the reining into the private health
insurance rebate to that increase?

Mark Arbib: Kieran, we'll have to wait and see what happens tomorrow night but you are right what
you are saying that this is a huge-we are delivering on our commitment in terms of reforming
pensions.

Mitch Fifield: You are breaking your election commitments.

Kieran Gilbert: Can the Treasurer pin it to-can he do both?

Mark Arbib: You had plenty of time to do it, you failed to do it. Mal Brough turned up to Cabinet
and knocked them over. He said well, we should reform pensions and they said sorry it's a bit too
hard for us. We've taken it on, we're delivering it. In terms of what it means, it means yes
there're some tough decisions coming forward in terms of the Budget to make that-to pay for that
and in the end that would come back to the Senate, and the Liberal party ...

Kieran Gilbert: Can't you pin the legislation to the pension increase?

Mark Arbib: We'll have to wait and see. I mean, but in the end, the question and the pressure is
going to be on them, on the Liberal party ...

Mitch Fifield: I've got to respond, Kieran.

Mark Arbib: On the independents to make a call on that. They block everything. They tried to block
the Fair Work Bill, they tried to block the infrastructure and the stimulus. They consider
themselves so economically responsible they block the alcopop measure, $1.6 billion.

Mitch Fifield: Come on, give me a go.

Kieran Gilbert: Let's hear, let's hear Senator Fifield.

Mitch Fifield: Look, Kieran. Labor's new initiatives are not funded by savings. This is a Budget
which is funded by borrowing and the government taking an axe to a few programs which they've
always hated such as the private health insurance rebate does not a fiscal strategy make. The
government's got to be honest. There are few things that they've always despised such as the
medicare safety net, the private health insurance rebate, our reforms for superannuation. They
pretended last election that they were in favour of them, they weren't. They're using the current
situation as a cover to take the axe to those. They shouldn't for a minute pretend that they are
actually funding their new initiatives from those sorts of measures. This is a Budget which is
built on debt and borrowing.

Kieran Gilbert: Okay, gentlemen. Senators Mitch Fifield and Senator Mark Arbib. It should be a
fascinating week ahead and thanks for a lively discussion this morning, gentlemen, thanks very
much.

Mitch Fifield: Thanks, Kieran.

Mark Arbib: Thanks, Kieran.