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Tanner admits Federal Govt will be attacked f -

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Tanner admits Federal Govt will be attacked for some cuts

Broadcast: 14/05/2008

Reporter: Tony Jones

Finance Minister Lindsay Tanner speaks about the cost cutting that contributed to the Federal
Budget surplus.


TONY JONES: Much of the rigour of the Government's cost cutting to contribute to the Budget surplus
was shouldered by Finance Minister Lindsay Tanner, who's with me now.

Lindsay Tanner, you may just have heard Chris Richardson suggesting that although there's a lot of
reporting suggesting that the cuts and the savings amount to $7 billion, in fact, they amount to
under $2 billion; is that correct?

LINDSAY TANNER, FEDERAL FINANCE MINISTER: I am not sure what Chris's calculations are, Tony, but we
have delivered $7.3 billion worth of savings.

TONY JONES: He's calculating it from the Budget papers, and he's bit of an expert. I imagine he's
got it right.

LINDSAY TANNER: He also tends to take a very hardline view of these things so, I'll wait to see
what the basis of his calculations is. We delivered $1.6 billion worth of pre-election savings that
were announced before the campaign, a further $3.8 billion in spending cuts, that delivers on our
commitment to find $3 to $4 billion in spending cuts, and of course, in addition to that, about
$1.9 billion in revenue measures, totalling up to about $7.3 billion.

Malcolm Turnbull suggested this is a high spending, high taxing budget, when in fact, he must have
been reading somebody else's papers, because our Budget papers show that Government spending as a
proportion of the total economy is actually going to shrink from 24.9 per cent to 23.8 per cent,
and the tax take is also going to shrink. So, how he can claim, how the Opposition can claim that
this is a high taxing, high spending budget, when in fact it's the opposite, we are substantially
clamping down on Government spending to put downward pressure on inflation rates, I don't

TONY JONES: I'll come to that in a moment. Now, your first budget is behind you, it's been a pretty
painful process, do you now own the economy? Is everything that happens from now on, down to you?

LINDSAY TANNER: We have got responsibility for dealing with the economy's problems, obviously,
Tony, but things that are there that sometimes have a very long gestation period may be the
responsibility of the former government. But I am not interested in allocating blame.

TONY JONES: But people will want to know if the Reserve Bank were to raise interest rates again,
subsequent to this Budget, it would be your responsibility from now on, wouldn't it?

LINDSAY TANNER: I am not going to speculate about what the Reserve Bank may or may not do on
interest rates but it's our responsibility to get the Budget right, to get those settings right, to
put downward pressure on inflation and interest rates. The previous year, the year we're just about
to finish, had Government spending growing at five per cent in real terms in the middle of a mining
boom that was putting serious upward pressure on interest rates, and was a significant factor in
the Reserve Bank increasing rates late last year and early this year, we've brought that back down
to one per cent.

TONY JONES: A quick yes or no question. If interest rates go up again, do you accept it is the
responsibility of the Government that's brought down a budget.

LINDSAY TANNER: We accept it's the responsibility of our Government to do everything within our
power to keep interest rates as low as possible. That's why we have put the settings of the Budget
with a record level surplus, with government spending as a proportion to the economy at its lowest
level for nearly 20 years, and significantly lower than it has been, and with very substantial
savings, as the Prime Minister committed in his speech in Perth in January.

TONY JONES: Malcolm Turnbull says he's done preliminary modelling of your new taxes and charges,
and that they'll add 0.4 of a per cent to the CPI. Correct or not?

LINDSAY TANNER: I think Malcolm must have had the calculator out and he's pressed the wrong button
or something. I've got no idea where he gets those figures and it's worth keeping in mind that some
of those revenue tax increases will actually be paid by foreigners. There are things like the
passenger movement charge and increased Visa charges, for example. Most of these revenue increases
are driven by policy measures either to close off loopholes that have been exploited for tax
avoidance purposes or in the case of the so-called 'alcopops' to remove a discrepancy that meant
that young people in particular were being affectively encouraged to use these for binge drinking
and to make sure that there was a level playing field in the taxation regime across different forms
of alcohols. So, the response from the Opposition has been completely incoherent. One minute,
they're in favour of upper class welfare and everybody getting the baby bonus, then they're saying,
no there will be cuts now. Mr Turnbull's saying that the cuts aren't deep enough. It's very hard to
know exactly what their critique is.

TONY JONES: Alright, let's have a look at the Budget. One of the most astonishing graphs in the
Budget papers is the projected terms of trade rising by 20 per cent in this calendar year, the
largest increase in a generation. Has any Labour Government ever had it this good?

LINDSAY TANNER: The terms of trade are a very big factor, quite clearly. But on the other side of
the ledger we have suffered significant reductions in projected capital gains and other tax revenue
because of changes in the stock market and because of the impact of the US subprime crisis.

TONY JONES: Lindsay Tanner, you have to look at the figures here, the projections for Government
revenue, and they grow dramatically over the next three years, I mean it's astonishing how much
money is coming into this economy. Now, you have the task of spending it or saving it. It'll be a
huge temptation to spend a lot of it, isn't it?

LINDSAY TANNER: The revenue is growing very substantially but as a proportion of the total economy
will be lower than revenue as a proportion of the economy, the tax take as a proportion of the
economy is in this current financial year. We have been very disciplined in our projections.
Obviously, there's an ongoing battle to keep spending under control, that's my primary job, it's
always a difficult battle. We are committed to that. This first Budget demonstrates that we are
fair dinkum about that, we have put in place $7.3 billion worth of savings, a lot of them
controversial, a lot of them that we will suffer attacks about, but it is critical to ensure we put
downward pressure on inflation and interest rates. We have done our bit in this Budget, I would
expect we'd continue to do that in ensuing years.

TONY JONES: You say you might suffer a tax, but have your spin doctors maybe done the Robin Hood
analogy a little too much? When you actually think about it you may have taken the Baby Bonus away
from some wealthy parents, but with the other hand, you are actually giving them tax rebates on
childcare amounting to $7,500 a year per child for those wealthiest parents who are paying the most
for childcare. There's middle class welfare out there, isn't there?

LINDSAY TANNER: There's a very significant distinction, and that is that the child care tax rebate
is about participation in the work force. We have got a very serious skill shortage in this
country, we don't want a position where women in the upper skills bracket have disincentives to
participate in the work force, even though our nation has invested in educating them, in developing
their skills, they've invested themselves. So, the purpose of the childcare tax rebate, amongst
other things, is to facilitate greater participation in the work force. Whereas, the other
payments, particularly Family Tax Benefit B, if anything, are disincentives to work force
participation. There's a welfare payment on one side and an incentive to participate on the other.
They are very different things.

TONY JONES: Alright, Lindsay Tanner, we'll obviously we'll speak more about this in weeks to come.
That's all we have time for tonight, I should say, because now we've actually got to go to the
other side of the equation.