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Transcript of interview with David Speers: Sky PM Agenda: 20 February 2013: MRRT; Budget; a plan for Australian jobs; Australian Greens

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

PW 268/13 20 February 2013




SPEERS: To discuss some of these matters and more I'm joined by the Finance Minister Penny Wong from Adelaide ahead of tonight's Community Cabinet meeting there. Thanks for your time

WONG: Good to be with you, David.

SPEERS: I want to start on the mining tax. Is it still your belief that the reason that the revenue came in so much lower than expected or forecast was because of the fall in commodity prices and the high Australian dollar? And, if so, is there any point in Treasury talking to the states about changing how this tax operates?

WONG: Well, if we can first start with how the Minerals Resource Rent Tax operates and how this particular tax operates. It is a tax that changes - in terms of the revenue it receives - depending on profit levels. And that makes it much more economically efficient. It means that when prices are very high and profits are very high you get more revenue. It also means when firms aren’t earning the same sort of very high profits, they don’t pay as much tax which makes more economic sense, and certainly more economic sense than a royalties regime which is entirely based on volumes and doesn’t reflect what’s happening to prices. But a profits based tax -

SPEERS: So the point is the tax is working as it’s meant to, is that what you are saying?

WONG: I’m saying that’s how this tax and how resource rent taxes work. I would also make the point ... In the introduction you talked about the Budget. This is one of the economic facts that we as a government have to deal with and I would argue that the Opposition, if they’re serious about demonstrating their economic credibility, also have to deal with, and that is that governments are getting less revenue because of what’s happening in the economy. That’s happening at state levels, it’s happening certainly at the federal level, and


in part that is due to the squeeze on profits that the high Australian dollar and the terms of trade are giving effect to. So they’re some of the economic facts.

SPEERS: So, if it essentially is the reason for both the Budget surplus not being delivered and the mining tax coming in much lower than expected because of the external factors - if you like because of the commodity prices and the dollar - again the question is, what's the point then of Treasury talking to state treasuries about changing how the tax operates?

WONG: That’s a process that’s been in place for some time. As you know we had the review of the GST arrangements that the Treasurer commissioned and now there’s a Heads of Treasury process to consider how that would be implemented or given effect. That’s a process that’s underway.

SPEERS: What is the point of this though? Is there a case for change?

WONG: I think it’s reasonable for us to work through with the states the findings of that review of which that is one and we’ll do that in a sensible way. But I think what we won’t do is have the kind of hysterical debate that we’ve seen from the Opposition who are really keen to ensure they inflict as much damage in terms of confidence on the Australian economy which isn’t good for jobs and it’s not good for growth.

SPEERS: I am trying to get to the Government's aim here. Is it to try to somehow convince or force the states to stop putting up royalties which the Commonwealth is having to refund?

WONG: I think there is certainly a policy issue here which is that royalties are a much more inefficient tax and we know that. I think that’s a self evident proposition. But in terms of the GST Review, as I said that’s an ongoing process and we’ll continue that dialogue. Heads of Treasuries are currently doing the work that the state Treasurers and the federal Treasurer asked them to.

SPEERS: To what end Minister? What's the aim for the Commonwealth in these talks?

WONG: You’re asking me to give you what the outcome of that will be while the process is still underway and David and I’m not going to do that.

SPEERS: No, no, I’m not asking the outcome, I’m asking what the aim is. What’s the point?

WONG: Well, let us go through that process and then I’m happy to come on this program and have a discussion about the outcome.

SPEERS: I’m confused here because what’s the point of having these discussions? What’s the Commonwealth trying to achieve here?

WONG: We’ve made clear for some time that the interaction between royalties and the mining tax obviously has some implications. That was discussed in the context of the GST Review and, as I said, we’re going through this process of discussion. But I’m happy to come on the program after the outcome has been resolved at the Heads of Treasury and Treasurers level but I’m not going to pre-empt that.


SPEERS: Alright. Well, look either way it does leave a hole in the Budget, the lower than expected mining tax revenue. The Treasurer has -

WONG: I’d like to pick that up actually David because I think the important point here is - and I know that the Opposition want to only focus on the mining tax - but the challenge for the federal Government and the challenge for revenues is not driven primarily by the mining tax. It’s driven by the fact that taxes across the board - profits based taxes, including the company tax more broadly - are down from what we anticipated they would be and that’s because, as you and I have discussed, of the high dollar and the terms of trade.

SPEERS: So revenues are down across the board. The Treasurer has ruled out an increase in income tax to plug this hole and also any changes to the GST. The Prime Minister has ruled out introducing a tax on superannuation withdrawals. Can you now rule out higher taxes on some other superannuation contributions?

WONG: Look, as the Finance Minister I get many, many questions in the lead up to a Budget. What I would say about superannuation is that Labor has a pretty proud record when it comes to superannuation. We introduced it. We put in place measures to strengthen it, particularly for low income earners. And let’s remember one of Tony Abbott’s signature policies, one of the few things he’s 'fessed up to wanting to do is to put a tax hike on low income earners’ superannuation - the 3.6 million Australians on lower incomes. But -

SPEERS: I'm just asking now what the Government is doing. You have increased the tax on super contributions. Will you do that again?

WONG: I think this is one of those rule-in rule-out questions, isn’t it David? What I would say is what I’ve said on your program previously, which is that we do have to look very carefully at the federal budget. We want to make room for important investments such as the school funding reforms which are important to the future of the economy. We want to look at how we invest in the National Disability Insurance Scheme - that’s a very important plan for Australians with a disability and I think there’s strong merit in that. That does mean we have to look very carefully at how we fund those policies.

SPEERS: The problem is, though, that the Treasurer and the Prime Minister have been playing the rule in-rule out game, haven't they? So you are going to get these questions. What about things like the diesel fuel rebate for miners or the childcare rebate?

WONG: But, David, I don't think I'm joining in your game, am I?

SPEERS: Well, it’s their game isn't it?

WONG: I think you're playing it and, no, I'm sorry I will decline to join on this occasion.

SPEERS: You’ll be more disciplined than some of your colleagues perhaps. Let's turn to the jobs plan then that the Prime Minister has been selling this week. Fairfax papers today report there have been concerns or were concerns raised by the Industry Department and the Tax Office about whether the $1 billion savings measure can actually be achieved. This is the cut to the Research and Development tax concession for the biggest companies in Australia. Will that $1 billion savings be achieved?


WONG: First I want to say this is a very good plan that Minister Combet has put together at the request of the Prime Minister. It is a plan that recognises the stresses and strains that the structural change in our economy is meaning, particularly for small and medium enterprise, and the importance of planning for the future; working out what are the policies that help to drive jobs and growth into the future. In terms of the policy costings, what I’d say to you that this is a Treasury measure. This is something Treasury looks at and their assessment of what would be yielded from the policy changes the Government makes. Policy changes which as I want to emphasise are about saying that look do we really want to have a high tax concession for those company when we can use that money more effectively for SMEs - small and medium enterprises - and use that money more effectively to encourage better collaboration between research and industry because we know the importance of innovation in terms of future jobs.

SPEERS: But, again, how confident are you that that money will be there? That $1 billion you have earmarked for savings? Forecasts over the last year or so haven't been great ...

WONG: Well, this is a Treasury assessment. It's not a political assessment, it's a Treasury assessment. And people who want to throw stones at that I suspect are not people who are able to make an assessment of similar quality themselves.

SPEERS: Can I just go to another Budget related question. It’s not a rule-in rule-out one. But it’s just about whether this year’s Budget will -

WONG: Are you sure? (laughs)

SPEERS: (laughs) … Whether it will include an update on the carbon tax revenues because, as you know, in two years it transitions from a fixed price to an emissions trading scheme and it looks pretty clear that the price is going to drop fairly dramatically to where the European price is. That will affect revenues, won't it?

WONG: Well, there is a few hypotheticals in there, including what projections for the carbon price might be in the 2015-2016 year and beyond that. What I’d say is this -

SPEERS: You don't think the European price will be $29 do you, surely?

WONG: I’m saying that's a hypothetical scenario and I'm not going to be drawn on that. What I would say is we update and review all of our estimates and forecasts in every budget update and this will be no different.

SPEERS: So there will be an update on what Treasury expects the carbon price to be after it goes to a floating price?

WONG: As I said, we update and review our estimates in every budget update and this will be no different. That's what we do when we put the Budget together. We have a look at the forecasts, the projections. We have a look at our assessments about expenditure going forward. And we make the decisions which we are then transparent about with the Australian people which I have to say puts us in stark contrast to Tony Abbott who doesn't want to tell you anything about what he’d actually do.


SPEERS: A couple of questions on politics if I can. The Greens...

WONG: I thought this was all on politics, David (laughs).

SPEERS: (laughs) Policies, Minister, policies.

WONG: I’m very glad.

SPEERS: Do you have any regrets on the deal done with the Greens at the start of this parliamentary term; the document signed between the Prime Minister and Bob Brown at the time… any regrets about that now?

WONG: We had a Parliament elected in the last election where the Australian people returned to Parliament where no party had a clear majority and we had a responsibility to form a stable government that was capable of delivering the policies that are needed for the economy and for the country and that's what we did. I'm not surprised by what's occurred in the last 24 hours. I think the Greens are intrinsically a party of protest. I think it always sat somewhat uneasily on them the discipline of having to be part of decisions such as a Government would take. We are a party of government. We understand you have to make difficult choices. And unlike the Greens we do have a much stronger focus on economic management and jobs.

SPEERS: Can I also ask you about… well, there’s been a bit of a tit for tat - the Treasurer has been accusing Tony Abbott this week of importing Tea Party style politics to Australia, a reference to the US Republicans. The Opposition Leader has hit back by saying it is the Coalition who has home grown policies, to use his words ‘with an Australian accent’ and he referred to the deeply negative politics that Labor has been trying to import from the UK and the US. Some have read that as a shot at the Prime Minister bringing in a Scotsman as her communications director. Does it really matter where ideas come from if they are good ideas? What do you make of all of this?

WONG: First on the Australian accent issue - I think in modern multicultural Australia we have long understood that your patriotism and your contribution to this nation have nothing to do with your accent. I think this demonstrates again how out of touch Mr Abbott is. In terms of the Tea Party issue, I think that the Treasurer is absolutely right to point to some of the economic policies - or lack thereof - that Tony Abbott has. We’ve seen some of them in recent days with the leaking of policies involving moving people north and a whole range of unfunded dams being built all over the country. The reality is Tony Abbott seems to take more of his economic advice from Senator Barnaby Joyce than anybody sensible.

SPEERS: Alright, Finance Minister Penny Wong, we will have to leave it there. Thank you very much for joining us this afternoon.

WONG: Good to speak with you.