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(generated from captions) softer than we would like. For the reasons outlined. But we have taken in this update, in this economic statement, some 17.4 billion dollars of savings, net savings of 8.1 billion. So the government has continued to take savings in recognition of the importance of a sound fiscal strategy. I'm sure the Minister for Health can provide more information on price disclosure and the intricacies of the PBS, but as I understand it, price disclosure is currently set out in the MOU of medicines Australia. The government is shortening the period for disclosure and the implementation of a market price from 18 months to 12 months and that is the basis of the saving that you see. I would emphasise that is to be put in place after the current MOU expires.

What's your message to the banks today? They're saying they will pass on the costs of the financial stability fund, the deposits tax, to consumers, to customers. Do they have a responsibility to shoulder some of that cost themselves seeing it's an insurance policy, we all pay insurance policies? Why don't they take it out of their profits, why do they whack customers(You're right to raise that question. They have to make a decision. It could be that a bank or banks decide to absorb some of that cost and make themselves more attractive to customers. And make a strir tu of that. I will be unsurprised if that were the case. As I said, I want big and strong and profitable banks but the big four banks have had profits of $92 billion collectively over the past four years. They could make a decision, one or more of them could make a decision to absorb that cost. They could make a decision to pass it on, which would then mean their customers would bear that in mind and look at their returns and they may make a decision accordingly. But you're right to point out, Mark, with all seriousness and respect to the banks that this government stepped in during the global financial crisis and made an important step to guarantee bank deposits. More than one person had pointed out it was absolutely vital to the survival and prosperity of our banks. Now, a few years later, in light of the changing circumstances, IMF and the Cowell regulators look at this
and say we Cowell regulators look and say we think it's time the banks make a contribution and say we think it's banks make a contribution to
that guarantee, that guarantee, a modest one, basis points, and let this
build up. Now, that is

build up. Now, that is I think a reasonable approach, it's a sensible approach. I will continue to work constructively with the banks. I believe that I have in the past and will continue to do so in various portfolios. The government is obliged to take into account good policy advice and act on it even if it may not please everybody all of the time. Are your costings assuming a fall in the number of boat arrivals over the four years and if so can you expand on what that forecast is and would it be wise to assume a fall? And a related question which is the coalition seems to be assuming that its plan would cost about $50 million, its Nauru plan. But they say they don't need to put that into the parliamentary budget office.In relation to the forecast, my understand something that they're based on the same rate as our budget. And obviously a number of policy initiatives have been undertaken which we believe over time will have an impact but the prudent thing to do is to leave the forecast as it is at budget time. In relation to the opposition's costings on Nauru, they've got form here. These are the guys who got a catering company to do their costings last time. They may think they don't need to present these cost togz the parliamentary budget office or the Treasury or the Department of Finance. I think you're entitled as members of the fine estate you're members of to be rather cynical about that approach. They should stump up their costings for full scrutiny as we have done, for full scrutiny and public kizo disclosure. You've answered a question before about the Treasury forecasts. If does deteriorate further, as you said sacred is the pledge to have said is a possibility, how sacred is the pledge to have a surplus? Is it a surplus at all costs? Is it a surplus come hell or high waters are or are you prepared to let the surplus drift out even further?I take this approach , Phil: that this is our strategy. This is what we believe is the right approach given all the evidence before us. And I believe with everything I've seen about the world economy it will continue to be the right approach. It may have further challenges, it may have further difficulties. I believe it will be continue to be right approach. We will respond to changing economic circumstances, as necessary. Wer are outlining a strategy today and a strategy we'd intend to stick to. You're not guaranteeing a surplus.Yes, parameters change around the world economy. Yes, that does sometimes provide pressures for governments in sticking to their fiscal strategy. But we've outlineed that we're prepared to take tough decisions. We announced them today. The government has made them in the past. And I believe we'd continue to do so. A week ago, your office was saying that you were still sticking to the commitment of a balanced
budget in

budget in 23015-16. Did that just prove too hard, or did something change to ...It's a very fair question we stuck to the strategy of returning the budget to surplus in 16-17, but looked very closely in the light of all the incoming information from the departments of finance and Treasury, at the economic circumstances and decide that further cutting over that three year period would be deleterious to the national economy. We had to make that judgment. And that's what you do. You make a judgment based on the evidence before you. Further swinging cuts would be a blow to jobs, a blow to growth, and endanger our economic prosperity. So we've taken what we think is the balanced and right approach to surplus, we're achieving surplus by 2016-17, reducing the deficits as I showed before over those years, in a gradual approach to surplus. But doing so in a measured way. One of the man tras of your predecessor Wayne Swan was that the government had low unemployment and strong economic growth. Is this now basically confirming we've got higher unemployment ahead and slower growth. How do you sell that in an election year and was it all out of your control? One more question. In's $500 million of unallocated money. Will most of that be for the car industry?I will deal with the first question, the Minister for Finance might deal with the second. In relation to jobs and growth, yes, we've outlined an increase in unemployment and a reduction in economic growth. As the first table I put up showed, they are still impressive figures in the worldwide context. We're still growing stronger than most comparable countries. Question than many developed comparable than many developed countries. We've created almost a million jobs when Europe and United States have lost millions of dollars. It's still a very strong record we're building on and a very strong forecast but we're being realistic and laying out that there is a softening which affects both growth and employment and that is primarily the reason request e0've taken the decisions we have to carefully calibrate our spending and revenue decisions to not cut too much now, no harsh cuts to the bone now which would endanger further economic growth. The second question was in relation to the car industry. As you probably have seen some speculation in the papers the relevant minister is engaged in dialogue with the car industry, as is appropriate. We're strong supporters in the government of the continued operation of the car manufacturing industry here in Australia. That puts us in stark contrast to the opposition, who are cutting $500 million between now and 2015. So next couple of years and are refusing to commit anything beyond that. If there is to be any arrangement that is yet to be negotiated that would be offset.How do you explain the allocation of $500 million.I don't know quhaur e referring to.The policy is yet to be announced.That is a normal process of a contingency reserve and decisions taken not yet announced and standard budget practice.Not only has nominal GDP taken has a hit but so has real GDP. Yet in 2014-15 you have real GDP bouncing back to the same 3% it was at budget time. That's a bigger recovery from slower growth to get back to trend growth next year. What do you see as driving that bigger recovery? What's giving thaw - thaw confidence? It's a rarely modest growth from 2.75% to a rarely modest decline in GDP growth from 2.75% to 2.5%. It's not one of the larger writedowns that you not one of the writedowns that you might see. The Treasury is looking at next year and looking at the export phase of the mining boom, the investment phase has come to an end but we'll continue to still export. It will be less labour intensive. That's what I talk about when I talk about the transition in our economy. Exporting minerals, it takes thousands to build a mine, it doesn't take that many to run a mine. But you will continue to see strong economic growth compared to the rest of the world in real terms because of the fundamental resilience and strength of the Australian economy.I thought you said ...

$283 million in there for housing assistance for South Australia. Another $100 billion for health and biomedical precinct and $30 million in assistance for Tasmania. Why are those two areas a particular priority and on the issue of Deses taken and not announced, isn't that just storing up decisions for an election campaign?Clearly Tasmanian economy has its challenges for Tasmanian
economy is one of the weaker ones in the Commonwealth. It's appropriate that the Commonwealth work with the Tasmanian Government in relation to ensuring appropriate support and while the South Australian economy is more robust, it's still appropriate that we develop
bilateral arrangements with particular State Governments for particular economic or social outcomes. In relation to your other economy - as the Minister for Finance said, it is standard practice and procedure to have decisions taken not announced. This has been done before T means we allocate an appropriate amount of money in a prudent and responsible way for decisions that we intend to announce in the coming period. The other component is decisions where which might be commercial in confidence or have national security implications where the government does not publish specific amounts next to the

specific amounts next to the measures. There has been cutting questions about the wisdom of this sort of exercise. What's your message to Labor MPs who may have grown anxious in recent days and weeks about undergoing this sort of ...Certainly every Labor MP I speak to agrees that we've got to be upfront and honest with the Australian people about our plans. I think it's important as to who we are as a government. We're outlining the challenges, our plans, our opportunities. We're being very clear about that. Sure, you can be cute about these things. But is it being fair dinkum with the Australian people? We're calling it as we see T we're saying there are challenges here. I read in the paper, I read in your paper this morning, Phil, that the Liberal Party was planning after the election secretly to adopt a financial levy. Now, if it's in adopt a financial stability levy. Now, if it's in your paper, it's paper, it's probably true. You can do that sort of thing, or you can be upfront about it. It has its political costs and its political downsides. We're saying to the Australian people we are calling it as we see it. There are challenges in this economy, the transition in the economy does not happen automatically, it requires careful management and it requires tough decisions and we will tell you about them now. The opposition is proposing a commission of audit Campbell Newman-style, after the election, to reveal its cuts and tax increases then. They've got it the wrong way now if they're going to deal with these things responsibly.This is what responsible economic management requires. It's making these sorts of decision and making sure they're transparent to the Australian people.You mention ed ... (inaudible question)What do you see China's position in Australia's future economic development? The response of the Chinese authorities the People's Bank and the central
agencies is a responsible agencies is a responsible one. growth is sustainable and structurally sound. They're not letting credit growth get out of control. They've taken difficult decisions, increasing the SHIBOR, for example, it was a decision which had an immediate effect which is a responsible one to ensure that their growth is sustainable. It has some downside costs for them and for us and for everybody with connections in the Chinese economy in the short term. If it means China can continue to grow strong ly that's a good thing for China and a good thing for the world.You have a revenue issue but you have a spending issue. What do you say to people who look at these numbers and say it's fine to talk about the world, but you're spending too much, you've been spending too much and blowing out above the inflation? With respect, you're selectively quoting 5.7%. You could've equally quoted 1.6% spending growth, 15-16, 0.8% spending growth, 16-17, 1.8.Those are out years which are projections. No, no, they are - those figures are based on the revenue decisions and spending decisions, these are relating to revenue decisions and spending decisions that we have taken responsibly to ensure the budget returns to surplus. They are based on the decision Wes have taken and the economic parameters ...You're not currently in a spend-a-thon?I don't think the figures would bear that out.Very quickly, I can take you through the contribution to the 13-14 figure and it is driven not by decisions of government, it is driven by the reduction in anticipation revenue of some $8 billion and payment variations of about $4 million which are not discretionary decisions of government. Can you explain what projects might be delayed in Defence or where the cuts might come in ...There has been some reprofiling of defence spending to reflect the realities of the construction program. The Defence Minister would be best placed to provide more details. You've got $733 million revenue increased revenue from your financial stability fund. Why wouldn't you have that money quarantined off budget like the Future Fund? How could.that just go into general revenue as a savings?With respect, you're not quite right. It reflects in the underlying cash balance but it is quarantined as a special stand-alone fund which would be administered as such and could not be used for any other purpose.What's the purpose of that money?The purpose of that money is to build over time and to be available should a financial institution fail and in case the government needs to provide payments to people who are affected by that failure. There are plenty of economists
out there who stay that there is a case out is a case for having a look at structural savings and structural spending changes. Would a re-elected Labor Government consider a review of of the structure of the deficit, structure of the surplus over time to look at those savings?I think our track record shows that we take the difficult decisions necessary, but the key here is not whether you have a commission of audit or not, it's whether you are honest about it. You say we're going to have a commission of audit and they'll tell us what the savings are after the election. We'll get back to you shortly is their approach, after you have elected us. It's just not on. One more question. A commission of audit is just a smokescreen, it's nothing more than a device for hiding your cuts.Can you explain for a layperson how it's possible to take a bucket of money and set it aside in a rainy-day fund only break glass in case of emergency and also count it your budget reckoning, how can that both be possible? Sneeze the way the Department of Finance advises that it should be calculated. I can assure you just as the Future Fund is set aside ...But it's not on the budget bottom line. As the Future Fund is set aside as a locked box, so this fund is and will only be used in that circumstance and well will build over time to become a substantial fund at the availability of the government in the unlikely and unfortunate event that that is necessary. Thank you very much, ladies and gentlemen.

Bowen and the Finance That was the Treasurer Chris Penny Wong at a press conference after Penny Wong conference after they released their economic statement. The statement forecasts that the deficits in 13-14, 14-15 and 15-16 will rise from what had been forecast. In 2013-14 at budget time, there was a forecast of a deficit of $18 billion. That's now gone out to $30 billion.

The government is still promising to return to a surplus in 2016-17, instead of a $6.6 billion surplus, that will now be a $4.billion surplus. Part of the reason for this is another downgrade in revenue from what was forecast on budget time. The revenue down grade is $33 billion over four years, $8 billion in 2013-14 alone. The government is predicting the economy will grow slightly slower. The forecast is it will grow at 2.5%. The budget time forecast was the economy would grow at 2.75%. It's also forecasting unemployment will be higher in 2013-14, and the following year. Now with a 6 in front of it. At 6.25% each of those years before dropping back down to 5%. The government says it has made $17 billion worth of savings. The newest saving, one that wasn't leaked, is another cut to the public service, an increase in what is called the efficiency dividend. That will rise from what the government had said it would do in 2014-15, 2015-16 and 2016-17. As already announced, the government is increasing the tobacco excise, expected to raise $5.3 billion over four years. It is also cutting some aid spending to help fund its measures on asylum seekers and it has detailed for the first time the costs of its deal with Papua New Guinea. The costs on asylum seekers generally have gone up, they've gone up by 1.3 billion dollars in four years. The Papua New Guinea deal share of that is $1.1 billion over four years, the cost of the expanding the Manus Island detention centre is $194 million in 2013-14. That will be partly offset by lower onshore detention costs, they're down over $400 million, over four years. The government says it has funded other costs through other offsets in spending. The community-based arrangements will asylum seekers are released into the community will cost more but the government's partly offset that by cutting the AusAID budget. It's also using the aid budget to finance help to Papua New Guinea for processing refugees, and it's also detailed the cost of the extra aid spending to Papua New Guinea as a result of the Papua New Guinea deal which would see the Australian Government help Papua New Guinea with costs of funding hospitals, universities, roads that is $420 million over four years. That nearly doubles the Papua New Guinean aid budget. A couple of other things you may have heard during the press conference, some talk about the decisions taken but you're not yet announced. There's more than $500 million set aside in the budget for that, $105 million in 2013-14 then $129 million then $143 million and $158 million. The Finance Minister Penny Wong says some of that may to be cover spending which is commercial in confidence, but some of that may well be set aside for an election war chest. There has been a campaign too against the government's decision to put a cap on work related expenses. Deducting work related expenses of $2,000. Now the government has deferred that cap until July 2015 to allow it time for more consultation. more consultation. That will cost the budget $250 million over four years. over the over four years. And also in
the economic statement it says that the it says that the debt ceiling will be will be reached in December this year. That's a debt this ceiling of $300 this year. That's a ceiling of $300 billion. The net debt in 20 is expected to net debt in 20 is expected peak in 2014-15. It was expected to be $1 2 8 million this year. It will now be $184 billion. So this is an economic statement that the Treasurer Chris Bowen says shows all the government's figures, shows some tough decisions, he says, but the government has not touched as the Treasurer pointed out payments to families, pensions, it's not touched as some speculated the Schoolkids Bonus. The Treasurer says the outlook is still volatile. We've seen that volatility again in volatility again in another
revenue downgrade, the latest in what is now a long line of revenue downgrades and the Treasurer says the government is ready to take further tough decisions if they are needed to match any further revenue down grades but this is what the government will take that-to-that election. This is one of the last things the government had to do. It may have an announcement on cars yet to come. We have been expecting that. The Finance Minister Penny Wong didn't give us any further information on this but this economic statement was one of the last things the government had on its to-do list before going to the election. The smoke lakes will now turn to when that election might be f the government wants an election on September 7, it has to be called by Monday. So that is government has announced today. Cuts to government has Cuts to the public Cuts to the public service, increases in tobacco tax that we already knew, and also setting up a fund to take the proceeds of a new levy, a new tax on banks for the deposit guarantee that the government has introduced, but as now back to the main ABC News 24 studio. Ooichl Lyndal, it's certainly a difficult budget to take to an election. And also a very different picture that was painted by the previous Treasurer less than three months ago at the Federal Budget?Yes. There are some very big changes not the least of which is another revenue downgrade, and some not so rosy forecasts particularly on unemployment. It has been a while since we've seen an unemployment forecast with a 6 in front of it. But the government has done, while the new levy on bank deposits is not making some people unhappy in the banking industry, the Treasurer was very much defending it as something that had been recommended by the Australian regulators, by the International Monetary Fund. The government also did not change its decision to tighten up the requirements for the fringe benefits tax on cars. As some had forecast it might do after the reaction from that industry, and after the strong criticism from the opposition. The other things it's announced, public service cuts while they have a particular effect in Canberra where Parliament House is, they tend not to have - tend not to get a negative public reaction, not too many people mind when the Parliament public service is cut, and also the rise in tobacco excise, while it does disproportionately affect lower income earners because the costs rise the same for everyone, the government is hopeful that people will see it partly as a public health measure and won't mark the government down for that. That's our political editor Lyndal Curtis in Canberra. To try to cut through some of these policies now, I'm joined in the studio by independent economist Nicky Hutley. What did you make of this statement we just heard from Chris Bowen?There's a couple of things. One probably no surprises really in an election year where we are seeing down grades to the economic outlook. They had to do something. One could say they've taken the easy way in doing things like the bank deposit insurance, the tax excise on tobacco. But the tone of the Treasurer, I quite tone of the Treasurer, I found,
quite alarming ly conservative and the fact and the fact they've now raised unemployment estimates to 6.25% which is right where the market would expect it to be over the coming year. There was a very bearish tone to the way the Treasurer spoke today that if he's trying to instill confidence in the markets and in business generally given the gloomy atmosphere that's already out there, he really didn't set the tone to do that today. Just some of the language you were saying that the mining boom is ending, China is slowing, it's not a crisis but a transition and that's what's going to be the interesting thing to see how Australia does transition?I think the whole world is transitioning at the moment. We have China moving towards a model away from investment towards consumption, we still have huge problems in Europe. We're seeing additional bail-out funds go to Greece. The one shining light at the moment is the US where the numbers tend to surprise on the upside. Stwre to remember that is still the largest economy, at least for the next decade or so. So we are seeing all these adjustments then add on to that Australia is moving away from a mining investment boom to a mining production boom but while Australia is undergoing some structural change, it's not a sharp shock to the system as the GFC was. So we really shouldn't be taking these structural adjustments that are going on in the world as something new, as something sharp and shocking but something that is an ongoing process. Why the forecasts changing so much? It was only weeks ago that there was the federal budget and now to have such big changes weeks, what's really happening?I think there are a couple of happening?I think couple of things. One is that business and consumers have been very, very slow to respond, more slow than usual, to previous interest rate cuts. We've seen the dollar at very high levels for a very long time. It's also added to negative sentiment. And we've seen numbers that come out on the economic data have generally been more to the downside, particularly with business confidence, when we saw the manufacturing survey this week, you know, really quite negative. And we're also probably seeing most significantly a much sharper downturn in mining investment than was expected. It was expected to tail off. And while overall levels still will remain high, we are just seeing that that transition is happening probably more quickly and with a slower pick-up in the sectors that are supposed to take the slack off that was always going to be very, very hard to predict.Some of the main changes that we're seeing is the - today it was announced the banking levy I suppose you'd call it, insurance levy. Is that something that was needed?Eempts it's my opinion that it wasn't. Australia already has very, very good prudential regulators. The Treasurer has pointed to what's been recommended offshore but Australia has quite a different system. That's been shown throughout the GFC to be very strong. I don't think it is the government's place to be acting as the role of the insurer of the private banking system. I think APRA can bring in its own regulation it is it needs to, but I think they've already done that and to me it seems like a cheap trick in terms of accounting measures. It sounds on the surface to be solid but I think it's coming from the wrong quarter. It should be coming from the banking sector and the banking regulators.Why is it coming now? I know that we've had a guarantee in place for the banks since the GFC. But I just found it quite interesting that the Treasurer was talking about how difficult the economy is and now we're looking at insurance policies for banks that might collapse?He did actually, in response to one of the questions, say oh this is for a rainy day further down the track. I'm glad he clarified that. You could take this as being gosh should we suddenly all be a worried? He needs to be more careful more on his messages. A cynic would say this is purely a built of creative accounting. No-one will argue with five basis points on your deposits to say that this is a draconian measure. You can argue that it is in some ways a little bit sensible to put money away for a rainy day but the timing of it one has to be a bit cynical. If you look at the levy on $10,000, it's $5 a year?It's not a great amount, but we have seen particularly if you look at Cyprus for example, what happens when bank deposits aren't guaranteed, it can be quite disastrous. To say that Australia is in imminent danger of that being a problem, we already have regulations that depositors have first claim, so yeah, it seems a bit strange the timing of it to be honest.

It always seems the aid
budget It always budget that's cut? As a budget that's cut? former member of the aid department you get about that sort of aid department you about aid department you get gresed
about that sort cynical and we've seen about that sort of thing. It is cynical and we've seen this
throughout the cynical and we've