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SENATOR THE HON PENNY WONG

MINISTER FOR FINANCE AND DEREGULATION

TRANSCRIPT

Parliament House, Canberra ACT 2600 Australia  Tel: (02) 6277 7400 Fax: (02) 6273 4110

PW 196/12 24 September 2012

TRANSCRIPT OF INTERVIEW - SKY PM AGENDA WITH DAVID SPEERS

SUBJECT: FINAL BUDGET OUTCOME

E & O E - PROOF ONLY

SPEERS: Penny Wong, thanks for your time.

WONG: Good to be with you.

SPEERS: Now, the deficit has come in at $43.7 billion for the last financial year. That is a fraction better than the last forecast from the Government about six weeks before the end of the financial year, but it‟s still a lot worse than what you forecast when you put the (2011-12) Budget together, isn‟t it? You estimated a deficit of $22 billion, it‟s now come in at nearly $44 billion ...

WONG: I think you‟re referencing the 2011-12 Budget figure, as opposed to the 2012-13 Budget. Obviously a number of reasons have led to there being a larger-than-anticipated deficit. One of them is, obviously, what‟s happened in the global economy.

We have had more softness in the global economy than was anticipated, and that‟s obviously flowed through to revenue. We‟ve spoken about that in the MYEFO, and also the 2012-13 Budget. Remember that -

SPEERS: Was it just global factors, or were there -

WONG: One of the things that the Treasurer pointed out in his press conference which is if you look at the accumulated write downs in revenues over the five years since 2008 and 2008-09, you see about $26 billion of that in the 2011-12 year. So obviously we‟ve also been dealing with lower revenues than were anticipated.

SPEERS: So in this one year - in the 2011-12 financial year - the difference between what you forecast and what you ended up with was almost $22 billion. That‟s not just because of revenue write downs.

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WONG: You‟re talking about, not our most recent forecasts, but a forecast from some time ago, and obviously -

SPEERS: When you actually put together the Budget ...

WONG: - in the 2012-13 Budget, we did update those figures.

SPEERS: No, I‟m talking about the 2011-12 Budget.

WONG: And those figures have obviously been updated for some of the reasons I‟ve outlined to you. Global circumstances, economic circumstances - certainly the global economy is in a different place to the one you would have imagined, say, 18 months ago.

SPEERS: But the Government is spending more on various things as well than perhaps you‟d anticipated. I want to go through a few specifics. The interest bill on public debt has grown, from $9.3 billion a year ago to $11.4 billion in the last financial year.

WONG: Actually, the interest bill has come in pretty much where we anticipated in the Final Budget Outcome. So, it‟s broadly -

SPEERS: Where you anticipated in the six weeks before the end of the year?

WONG: That‟s right - which is the most recent figures in the updates. So, the interest bill is, as I said, about where we anticipated. Having said that, obviously this is one of the reasons why it is so important to come back to surplus and why the Government remains committed to doing so.

SPEERS: But we paid last year $11.4 billion in interest on our debt. When is that figure going to start coming down?

WONG: Well, we need to get back to surplus. That‟s how you bring your interest payments down, is to make sure you bring the budget back to surplus, which is why the Government is committed to doing so. We think it‟s the right thing to do, given where our economy is.

But I think it‟s important David, just to be fair, we have very strong public finances in this country. And I don‟t want you to sort of pick up the „we‟re all gonna be rooned‟ thing that the Opposition keeps saying.

We‟ve seen the IMF, we‟ve seen the global ratings agencies back in Australia‟s strong public finances. And, as the Treasurer showed today, our debt is at a fraction of the major advanced economies.

SPEERS: But I‟m just trying to establish where our money‟s going, and this final outcome isn‟t forecast, this is where it was (inaudible).

WONG: That‟s right, this is a point in time, what actually happened.

SPEERS: Now, the other cost that we keep hearing a lot about is asylum seekers. I‟ve been trying to establish what the cost was last year. More boats arrived, more people arrived, the immigration bill went up to $2.7 billion, but there are costs on top of that, aren‟t

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there, when it comes to intercepting and rescuing people at sea, processing and housing them? What is the total cost now?

WONG: We will update our forecasts in MYEFO for immigration -

SPEERS: But I‟m talking about last year.

WONG: I don‟t have the full breakdown - we do it by functions in the Final Budget Outcome. But I would be upfront with you; the costs are higher than what we anticipated, because obviously we didn‟t anticipate we‟d have the sort of stonewalling we saw in the Federal Parliament for some time when it came to immigration policy. Obviously arrivals are higher than we anticipated and -

SPEERS: But you can‟t give me a total figure?

WONG: I can get that for you. We report on outcomes - on functions, I should say - rather than specific programs.

SPEERS: And just to explain what that means…

WONG: Government functions -

SPEERS: So, you don‟t report -

WONG: So, immigration, foreign affairs, those sorts of -

SPEERS: Defence?

WONG: That‟s correct.

SPEERS: So it‟s not broken down into specifics?

WONG: It‟s not broken down. And we do report on the major variations. But I‟ve been upfront with you on this program - the numbers are higher than we anticipated because we didn‟t anticipate that we would have, as I said, the kind of logjam in the Federal Parliament than we saw for so long.

SPEERS: The Opposition has accused you of trying to fudge and fiddle in this Budget Outcome, or in this budget process. They point to a couple of things - the Audit Office required you to include a $500 million dividend payment from the Reserve Bank in last financial year rather than in this current financial year, where you wanted it to be included. Also, a $400 million payment from the Australian Reinsurance Pool Corporation. You were trying to include them in this financial year as you try and hit the surplus.

WONG: Actually I wasn‟t quite sure what Joe Hockey was talking about there, because, those accounting changes to which he referred actually only affect the fiscal balance, not the underlying cash balance.

I thought, I have to say, Mr Hockey‟s press conference in response to what is a serious document - the Final Budget Outcome is a serious document, and something worth

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responding to - I thought it was a press conference really characterised by bluster and cheap shots. And, really, if he wants to be taken seriously, he probably has to do a bit better when it comes to his own costings.

SPEERS: OK, but those two points that he‟s making about those payments -

WONG: I‟ve answered that question.

SPEERS: They didn‟t affect…

WONG: The accounting treatment change that is transparently referenced in the Final Budget Outcome, affects the fiscal balance.

SPEERS: OK, but not -

WONG: Not the underlying cash balance.

SPEERS: And it won‟t impact on the surplus target for this year?

WONG: For this year? For 2012-13?

SPEERS: 2012-13.

WONG: The surplus target in 2012-13 - and we will, I‟m sure, have a long discussion about this, subsequent to the 2012-13 financial year - will be a function of many decisions. And I think I‟ve said -

SPEERS: Will these two payments -

WONG: - and I‟ve said to you it‟s wrong to look at a single decision for this target or for the subsequent surpluses.

The Treasurer today, for example, made very clear to you and other members of the Press Gallery and to the Australian people that we‟re going to have to take further savings in relation to the surplus. So there‟ll be a whole range of decisions. He referenced -

SPEERS: I want to get to that. But just to be specific, the two points Joe Hockey raised - this $500 million dividend from the Reserve Bank, $400 million from the Australian Reinsurance Pool Corporation - that won‟t affect the surplus for this year?

WONG: What I‟m saying is the accounting treatment that‟s referenced is in reference to the fiscal balance not the underlying cash balance. And I‟m making a broader point about whether it‟s a 2012-13 surplus or subsequent surpluses. They‟re the result of many, many decisions. And I think it‟s wrong to point to a particular decision and say „well therefore this is not right‟.

Joe Hockey, remember, if he handed down a Final Budget Outcome today his would be far worse because he opposed the Private Health Insurance Rebate, he opposed the closure of the Chronic Disease Dental Scheme and who can forget he opposed the Flood Levy and then put forward a range of botched costings for the Queensland Floods.

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SPEERS: Alright, getting back to your Budget -

WONG: But the point is you‟re putting to me a proposition from Mr Hockey and I‟m saying this is the proposition that should be put to him: wouldn‟t his be worse? Wouldn‟t his be worse given the position he‟s taken?

SPEERS: Let‟s look at this current financial year that we‟re in and your efforts to try and get a surplus. Now the Treasurer said today the fall in commodity prices will hit Government revenues significantly, which means you will have to cut deeper to protect that forecast surplus. Is the Budget now tied to commodity prices - the more they fall the deeper you will have to cut?

WONG: The Australian Budget has always been affected by commodity prices and we have factored in a fall in the terms of trade over the forward estimates. As the Treasurer said today, and as we‟ve said previously, obviously where prices are now is a more substantial fall. That is referencing what the spot price is. So obviously the longer term price is more relevant. But the Australian Budget has always been affected by the terms of trade.

SPEERS: But you want that surplus, you‟ve guaranteed that surplus, so if they keep falling you‟ll have to keep cutting elsewhere?

WONG: We think a surplus is the right thing to do and -

SPEERS: Regardless of where the commodity price goes?

WONG: Because of where the economy is. Given the economy is continuing to grow -

SPEERS: But if those commodity prices keep falling -

WONG: - at around long run trend, given the importance of a surplus in a world that is turbulent. I mean all the things that we‟ve spoken about that you and I‟ve spoken about, about why a 2012-13 surplus is important - and not just 2012-13 but the years beyond - remain the same. And what the Treasurer is saying, what I‟m saying is, it‟s going to be harder.

SPEERS: He also said today that the public service has actually grown under Labor‟s time in office. I know you‟ve been particularly critical recently of the Queensland and New South Wales governments for cutting public service jobs. Is this a no-go area for the Federal Government? You won‟t cut public service jobs?

WONG: We actually have made decisions to find efficiencies in the public service and we‟ve made them clear in the previous Budget - I think you might have criticised me in an interview for the efficiency dividend decision. But I think the point is it‟s a very different approach to the approach that‟s being taken by Coalition Premiers. It‟s an approach that says you should prioritise non-staffing savings first and we‟ve done that.

We‟ve taken about $13 billion worth of savings as a result of things like ICT, coordinated travel and improved procurement practices. So that is the approach a Labor Government

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takes. We have had to make some difficult decisions, that‟s true, but I think it‟s a very different approach from the one the Liberal governments are taking in other states.

SPEERS: Can you say there will be no public service job cuts?

WONG: What I can say is what I said when I first announced the increased dividend which is that our instruction to agencies is to prioritise non-staffing savings and to seek to avoid forced redundancies, and that‟s what the agencies have been doing.

SPEERS: “Seek to avoid”, that‟s -

WONG: That‟s what I‟ve said. I‟m on the public record saying that.

SPEERS: There might have to be some.

WONG: I think if you look at departments, most departments have sought to do exactly what we asked, which is to look at all the other ways in which they can find savings - a very different approach to Joe Hockey who will beat his chest about wanting to sack 20,000 people. It‟s a very different approach.

SPEERS: Penny Wong, thank you.

WONG: Good to be with you.

ENDS