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Transcript of interview with Karina Carvalho: SBS World News: 23 October 2012: Mid-Year Economic and Fiscal Outlook



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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 216/12 23 October 2012

TRANSCRIPT OF INTERVIEW - ABC NEWS 24 BREAKFAST WITH KARINA CARVALHO

SUBJECT: MID-YEAR ECONOMIC AND FISCAL OUTLOOK

E & O E - PROOF ONLY

CARVALHO: Good morning, thanks very much for your time Senator.

WONG: Good to be with you.

CARVALHO: There was a $43.7 billion deficit for the last financial year, a $1.1 billion surplus forecast for this financial year. Is this realistic or are these changes being brought in too fast and are they too drastic?

WONG: We’ve been working on the surplus strategy for some time as you know. During the global financial crisis, and coming out of that, the Government set some very clear fiscal rules and we’ve stuck to them. And those rules have us coming back to surplus this year and with those surpluses growing over the forward estimates. Because that’s the right fiscal policy, the right budget policy for the economic circumstances here in Australia, where we see trend growth, low unemployment and a big pipeline of investment. That’s how you give the Reserve Bank room to move on interest rates as they have.

CARVALHO: So why is the Government saying it is giving the RBA room to move on interest rates as a way of stimulating the economy rather than stimulating directly by increasing Government spending?

WONG: That is a good question and there are certainly times when Government should step in. And that’s what we did with the stimulus packages which ensured that Australia didn’t go into recession, which ensured hundreds of thousands of Australians didn’t lose their jobs like we saw overseas, and which has now Australia in a position where we’re going to be growing faster than any major advanced economy in the year to come.

But there is a time also for more normal settings, a different relationship, a more normal relationship, between fiscal policy - that’s the Government’s spending - and monetary

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policy which is the Reserve Bank managing interest rates. And our strategy has been to get back to that normal setting given where the economy is.

CARVALHO: So are you expecting the RBA to do the hard work of the Government?

WONG: No, we expect the RBA to do what everyone expects the RBA to do which is to act independently and to run monetary policy appropriately and I have no doubt they will do that.

CARVALHO: The RBA is independent but this is certainly a signal from the Government for the RBA to move and to act on interest rates and make sure they’re lower.

WONG: I think it’s a signal from the Government about where fiscal policy will be, which enables the RBA to make its decisions recognising that and they’ve done that. We’ve seen a number of interest rate cuts. We know that people with an average mortgage are now $4,500 better off as a result of the interest rate cuts we’ve seen since the Government came to power. So there is a real-life benefit to running this sort of budget policy. I understand that some of the measures in the budget update, and previously, haven’t been popular. But there is a benefit to families and also to businesses.

CARVALHO: One of those measures that is being seen as unpopular are the changes to the Private Health Insurance rebate. The Shadow Treasurer Joe Hockey was on our program earlier. He says that there are a million private health insurance policy holders with an income of less than $24,000 a year, particularly older Australians. That’s Labor not looking after its base, isn’t it?

WONG: Can I start by saying I think Joe Hockey doesn’t really know whether he’s for or against fiscal discipline. He talks a lot about the importance of fiscal discipline but whenever the Government puts forward a sensible savings measure Joe Hockey rails against it and says it’s dreadful, but doesn’t put up any alternative. Now, he can’t have it both ways.

In terms of Labor’s agenda, we are the party of Medicare. That means we want a health system, as the population ages, that is sustainable, that is capable of giving older and younger Australians in the decades to come the healthcare that Australians rightly expect. That means making sensible decisions now to ensure the health budget is growing sustainably. And that’s what these health insurance changes do.

CARVALHO: But you’re also taking money out of teenage dental schemes.

WONG: And the Minister for Health has announced previously a revamp of the Government’s dental policies. And the reason is that the Dental Disease Scheme that Tony Abbott set up has really not been a sensible and effective use of Commonwealth money. And I think it’s a good thing the Minister has made the announcement she’s made. It really adds to the Government’s - and the Labor Party’s - approach to providing healthcare in a sensible way to Australians.

CARVALHO: Let’s just go back to that Private Health Insurance Rebate changes for a moment, because, you didn’t really answer the question. Is Labor abandoning its base if a million private health insurance holders are earning less than $24,000 a year?

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WONG: I did answer the question. And the answer is that our base, and all Australians, would surely want a healthcare system that is capable of delivering to their needs, not just today but in the years ahead. And that is what this change does. It’s about making sure we can continue to have a strong health system.

It means we have to make changes at times. But the reality is the trajectory of the Private Health Insurance rebate before the Government’s changes - this, and the previous set of changes - was unsustainable. It would have taken up the majority of medical benefits expenditure by the middle of the century. Now that is not a sustainable funding measure.

And if Joe Hockey… he talks a lot about the structural position of the Budget, he talks a lot about thinking for the long-term, yet he’s never demonstrated the willingness, the courage, nor the transparency to show what he would really do to sustain Australia’s budget in the long-term.

CARVALHO: But he does have a point, with half of the $16.4 billion in savings over the four years, half of that will come from changes to the way company tax will be reported. They’ll now have to report monthly as opposed to quarterly. So that’s not technically a saving, is it?

WONG: It is a change to timing; it’s not an increase to taxation, that is true. The only party which is promising an increase in the company tax rate is Tony Abbott’s Liberal Party. Because they’re saying that they want to put in a company tax levy, a levy on Australia’s companies to pay for Tony Abbott’s paid parental leave scheme. It is a timing change.

But can I just come to this issue of discipline. We can talk about different measures. The best measure of what a government is spending is spending as a share of GDP, because that really shows how much you’re spending as a share of the economy. We’ll be spending - this year, and over the forward estimates, over the budget period - at or less than 24 per cent of GDP. The last time a government managed that over a sustained period was thirty years ago. Thirty years ago. Now, that demonstrates the cumulative set of decisions to date, including in the budget update, which has led to that fiscal discipline.

CARVALHO: Penny Wong, thanks for your time this morning.

WONG: Good to be with you.

ENDS