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Transcript of interview: Weekend Breakfast, ABC24: 3 November 2012: Holden; Economy; Budget Surplus; GST

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SUBJECTS: Holden; Economy; Budget Surplus; GST

HOST: Well the economy has returned to centre stage of the political debate with the Government toning down its promise to deliver a wafer-thin surplus. And millions poured into local car making plants are also under fresh scrutiny following Holden’s decision to cut 170 jobs from its Elizabeth plant in South Australia. For more, our political reporter Latika Bourke is joined by Small Business Minister Brendan O’Connor.

LATIKA BOURKE: Brendan O’Connor, thanks for joining us on Weekend Breakfast. Holden says it will continue to respond to the ebbs and flows in the industry. Does the Government expect more job cuts?

BRENDAN O’CONNOR: Well, it’s been a very difficult time recently with redundancies and the Government’s certainly concerned about those workers. Every worker that loses his or her job is a very very sad thing and therefore we need to be in place to help them.

We have a $5.4 billion New Car Plan, it’s something that’s important to invest in because literally that sector of our economy employs directly hundreds of thousands of Australians and indeed indirectly many many more, and we will continue to invest in that sector. It’s a very important part of our economy and we need those types of skills in this country.

And we are concerned that of course Tony Abbott is looking to cut $1.5 billion of our plan if he was to be elected.

LATIKA BOURKE: Brendan O’Connor, the Federal Government gave Holden $275 million in March. What conditions did you place on the car maker to protect local jobs?

BRENDAN O’CONNOR: Well, it’s all about protecting local jobs. We know it’s a very competitive world in the automotive sector, very competitive, and indeed if you look at the amount of money we invest in the car industry compared to say the United States, it would be seen relatively modest. We don’t determine each and every decision that the car companies make but what we do say is we want to see a future for the car industry. We believe that it is a very tough time at the moment simply because of the high dollar, it’s well above parity with the United States dollar and that’s creating certainly challenges.

But our investment is there, and there is some co-investment from State Governments, because we believe the sector needs to survive and thrive. We are looking at the New Car Plan and looking at

capturing new markets and being innovative. There are some very positive signs but as it goes through those structural changes, unfortunately you’ll see from time to time jobs being lost and that is a very sad thing, but we cannot stop that in every circumstance. But we must support a very important industry to this country.

LATIKA BOURKE: So you wouldn’t look at mandating some requirements from the car makers? Because what’s the point of this money if it’s not to protect the very jobs they’re now cutting?

BRENDAN O’CONNOR: Well as I say, in any sector of our economy you’ll see decisions to employ people or indeed on occasions sadly to make redundancies. We can’t determine all of those matters. But as a whole we should be investing in such an important sector of our economy as the automotive sector. We do so proudly, we believe the New Car Plan as outlined will create great opportunities now and in the future for that industry, and there are hundreds of thousands of jobs that are reliant upon that industry directly and many more indirectly.

By comparison, the Opposition has not supported the industry in the same manner and that is a concern to us if Tony Abbott were to be elected as Prime Minister of this country.

LATIKA BOURKE: Is the Budget surplus still an ironclad promise or just a forecast?

BRENDAN O’CONNOR: Well, it’s always been a determination by this Government to bring the Budget back to surplus as we have outlined. That’s been very important, Latika, because we’ve seen in a very short space of time a significant reduction in the cash rate. We’re now down to 3.25 per cent - less than half than it was when we were elected to office in 2007. What that means for a family with a mortgage of $300,000, it means a saving of almost $5,000 a year and that’s very very important.

So of course we are looking to ensure fiscal responsibility and return the Budget to surplus. We made some very difficult decisions recently in our MYEFO statement to cut areas, to make savings. They’ve been criticised by the Opposition. Both Tony Abbott and Joe Hockey have criticised the savings and yet they talk about fiscal responsibility.

We will continue to do the hard work. It is our intention to ensure that there is a Budget surplus and we will do everything in our power to do so. And that’s what we’ve said and we continue to say that.

LATIKA BOURKE: Now Brendan O’Connor, judging by your logic then, if for some reason the Budget is still in deficit in May when it’s handed down, does that mean interest rates will be going up and going up in an election year?

BRENDAN O’CONNOR: Firstly that’s a hypothetical question. Our intention is to reduce the expenditure and return the Budget to surplus. As we’ve seen, we’ve seen a 150 basis point reduction in the official cash rate. That is a remarkable reduction in 12 months, 150 basis points. What that means is not only relief for mortgagees and those people who are having real cost-of-living pressures, making decisions around the kitchen table, seeing the reduction in the interest rates has been very important for families across the country. But it also is important for businesses and insofar as my portfolio is concerned, small business, because that reduces the interest on their loans and that’s also important.

And look, we are fully confident that we will get this right. It is absolutely critical that we continue to be fiscally responsible. We know that the Opposition have a self-determined $70 billion black hole. That’s for them to determine. I think as we get closer to the election people will start wondering where the money’s going to come from when the Opposition continues to make outlandish claims in relation to expenditure without any guaranteed revenue streams, and I think therefore that’s one of the reasons why people are questioning Tony Abbott’s leadership as Leader of the Opposition.

LATIKA BOURKE: Well plenty of people are questioning where the revenue is going to come from for your own big-spending policies like the NDIS for example. We’ve got Gary Banks, the outgoing chairman of the Productivity Commission, and Nick Greiner both asking you to reconsider the GST, saying it’s an unstable form of revenue. Why is their advice worth ignoring?

BRENDAN O’CONNOR: Well it’s not a question of ignoring advice but it’s a question of considering advice across the spectrum. What we’re proud of, Latika, is that this Government has reduced the ratio of tax to GDP by a considerable amount compared with the Howard Government. The Howard Government was the highest taxing Government in our history. We’ve reduced taxes across the board and we do so because we’re fiscally responsible.

Yes, there are some very significant decisions to be made about the education reforms and also the NDIS, but it’s also important to note that if we are going to compete in the 21st century in the fastest growing region in the world, catering for the goods and services needed for the burgeoning middle classes in our region, we need to be a high-skilled, high-wage economy, not have a race to the bottom on wages. Now I would disagree with those who say we need to cut -

LATIKA BOURKE: This is not about wages. This is about increasing the level or the rate or broadening the rate of the GST.

BRENDAN O’CONNOR: Firstly I’ve said that we’ve been reducing the tax base, importantly because we want to make sure that we have an efficient economy. We also want to make sure that the Reserve Bank is in a position to cut the official cash rate when it can. Of course there’ll be those who want to consider broadening the tax base. Can I say to you that broadening the tax base on education or health services would be certainly a regressive step to those people who need those services? It’s all very well for former premiers like Nick Greiner to suggest we do that, but let’s think about the implications of imposing that tax upon health services and what it means for ordinary families.

LATIKA BOURKE: Okay Brendan O’Connor, I’m very sorry to interrupt you but we are well over time. So thank-you very much for joining us on ABC Weekend Breakfast.

BRENDAN O’CONNOR: I’m very happy to be here. Thanks Latika.


Maria Hawthorne Media Adviser The Hon Brendan O’Connor MP Minister for Housing

Minister for Homelessness Minister for Small Business P: 02 6277 7667 M: 0407 015 986