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Transcript of joint doorstop interview: Canberra Conference Unit: 31 January 2008: the Commonwealth and state deregulation agenda.

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DATE: 31/01/2008, 12.30pm

TITLE: Doorstop Interview, Canberra Conference Unit

TOPIC: The Commonwealth and state deregulation agenda.

INTERVIEWEES: Lindsay Tanner, Minister for Finance and Deregulation; Craig Emerson, Minister Assisting the Finance Minister on Deregulation

LINDSAY TANNER: We've had a very constructive meeting on the Commonwealth and state deregulation agenda and harmonisation of regulation agenda this morning and a number of things have been agreed. We've agreed to revitalise the hotspots process, the consideration of a range of harmonisation of regulatory issues that started last year but to some degree has just been proceeding slowly.

We're putting our shoulders to the wheel, rolling the sleeves up, getting moving to ensure that we get real progress on that over the course of this year and we'll be reporting to the full meeting of COAG late in March with an implementation strategy, a work plan. We've got two more meetings that will occur between now and then, late February and early March, which will refine that work plan, that strategy so that we can ensure that we get serious improvement, reduction in red tape and reduction in costs for business and consumers.

We've also agreed to consider a range of possible additional issues that we've asked the individual states and territories to go back to their particular governments to seek approval to broaden the agenda and I'll give you one example of a thing that we've decided to pursue and that is standard business reporting to make it easier for businesses, particularly smaller businesses to provide reports and information to government across various departments, to make it simpler, more straightforward. There's work underway at the Commonwealth level, led by Wayne Swan on that front. We're seeking to have that considered as an agenda item, as a possible priority area across both levels of government, as part of this process.

A number of possibilities have been put forward also that we'll wait until we see what response we get from the various states and territories as to whether they'll be priority areas. But we're up and running.

This is a good important agenda for government. It's to the credit of the governments last year, federal and state, that it was put on the agenda but it really needs to be pumped up and that's what Kevin Rudd's committed to doing and that's what we've done today is got the ball rolling and we're looking forward to achieving some serious gains over the course of this year in particular to benefit business and consumers.

Craig may want to add to that.

CRAIG EMERSON: Well the atmosphere at the meeting was very encouraging. It's not simply a matter of the Commonwealth driving regulatory reform. Various states are doing so within their own jurisdictions and they're enthusiastic about the fact that this agenda is being revitalised,

following the meeting of the Council of Australian Governments in December. They've all got the message but in any event a number of them were moving ahead with their own reform processes.

So if we can get all of that energy together in one place, this year does present us with an opportunity to be really able to accelerate the reform process. We also need to be realistic however as to what is the right outcome for reform in each area. It can be simplistic to say that the Commonwealth knows all and everything should be run by the federal government. We have six states, we have two territories and in some cases we can achieve harmonisation but still have best practise regulation going on in individual states.

In other words one size does not fit all, not everything has to be run by the Commonwealth out of Canberra. We recognise that, my own background is now as a commonwealth minister but also as a public servant from Queensland. So we'll be looking for the right outcome for

each regulatory reform so that we achieve these objectives. Make sure that we restore productivity growth in this country. After all that's what the regulatory reform process is about, what Kevin Rudd has been arguing, that we need three things to restore productivity growth in the country, investment in skills, wise investment in infrastructure and reducing the regulatory burden on business.

So we want to lift productivity, through that we want to lift the international competitiveness of Australian businesses and thirdly, very importantly, we want to do everything we can to improve workforce mobility so that people can move from state to state without having to go through new accreditation processes or new licensing processes.

So we're going to develop a paper which will be very readily and fairly quickly done which says why are we doing this, what are the principles that will guide our selection of reform priorities. So to summarise, I thought it was a very energised meeting and the states are joining with the Commonwealth in giving this a real good go. This year is a great opportunity. I think only once since Federation have we had the same political party in government at all levels. We do have that now and so we're going to make the most of this opportunity.

QUESTION: What's the top priority? What are the areas that you are looking at [indistinct]?

LINDSAY TANNER: Look, there's a number of areas on the hotspots list. Craig may want to add to this but there's been significant progress made on things like building regulation, licensing in occupational areas. There are a lot of areas where it makes no sense to have different arrangements in different states because there are so many businesses that operate across state boundaries and indeed many workers these days that operate across state boundaries. That list was put in place last year, a fair degree of progress has been made in some areas and we'll certainly be looking to get that moving and get some outcomes sooner rather than later. It's not easy because you've got eight different states and territories that you've got to bring together. They've all got their own issues and their own concerns but it is critical that in the 21st century we don't have this fragmentation of rules that cost business and consumers lots of money.

There's a substantial list of things that we also want to consider as possibilities but we have to leave those aside until we get a response from the states but we're expecting that to occur over the next week or two so that at the next meeting which is due in about three or four weeks times we can actually refine the list of possibilities and develop our set of priorities and a work plan that will go to COAG towards the end of March. Craig, might want to add.

CRAIG EMERSON: Trade measurement, national trade measurement system is an example, that's quite…

[Outside interruption]

…National trade measurement system is an example. There's been real progress there. In that case, the states have said, the Commonwealth should run that. In other cases, it won't be that the Commonwealth should run it. I'll give you an example.

There's been some progress made in harmonising payroll tax definitions. Does it, however, make sense for each state to have the same rate of payroll tax? I'd argue no because then you get the benefits of competitive federalism. If one state wants to reduce its rate of payroll tax, it should be able to and attract more business that way. That is actually in the interests of business and in the interests of productivity. That's why we're saying, let's be sophisticated about this. It's not a case of one size fits all that the Commonwealth should run everything or everything should be exactly the same. But we should be trying to work on reducing compliance costs, those unnecessary burdens on business to lift their competitiveness.

QUESTION: Mr Tanner, you've said the Fed Reserve move on rates and states, firstly what [indistinct] positive impact would that have for the Australian economy and also is there anything that

can really stop a rate hike here?

LINDSAY TANNER: Look, I am not going to comment on prospective Australian interest rate issues. Obviously the American economy does have great significance for what occurs in the Australian economy. We're not immune from the pressures of events in the United States and it's clear that the American authorities are concerned about the level of economic activity in the US and the prospect of significant downturn. So I would hope that this will have a very positive impact on US economic activity and minimise the risk of a US downturn contributing to wider problems in both our economy and of course in the world economy. But Australia is pretty well placed relative to most countries, to withstand those pressures but we're not immune. We can't resist them completely. We're obviously watching developments in the US very closely, but we think Australia's well-placed to avoid significant detriment but those issues do have an impact here.

QUESTION: Were you surprised they moved again so quickly?

LINDSAY TANNER: Oh, look, I wouldn't express any view one way or the other because obviously I am not Ben Bernanke, I am not in control of US interest rates and I don't have the same degree of knowledge and access to information that he has. So, obviously, it does indicate that there is serious concern with the US authorities about the position in the US economy. I think President Bush's stimulus, fiscal stimulus package, also underlines that the American authorities are concerned about the threat of a serious downturn but they, of course, have to make their decisions based on their knowledge and understanding and it's not up to me to comment on whether they've got it right or wrong. We have to just deal with the implications for Australia.

QUESTION: Are you worried about the effect of the interest rate cut on the Australian dollar because it does increase interest rate differential, it could potentially affect the Australian exports, the economy and tax receipts, which is your area.

LINDSAY TANNER: The Australian dollar is influenced by a whole range of factors including commodity prices and the strength of our commodity exports and obviously the high-level of the dollar in recent times has had a significant impact on some industries but we don't seek to promote a

particular level for the dollar, it was floated by a previous Labor government for very good reasons and any given level of the dollar will have, for some, an upside and a downside so the wider question of interest rates in the dollar, they're set - the dollar is set by market forces and international market forces and we support those arrangements and will continue to support them.

QUESTION: Mr Tanner, can I ask, some commentators talk about the US downturn perhaps having a silver lining and they might take the heat out of the Australian economy is that a view you subscribe to?

LINDSAY TANNER: Look, I wouldn't make any observations about the implications of the US - any US downturn for Australia because none of us can predict what may occur in the United States. The key thing in Australia is that we keep sustainable growth going and we keep productivity improving that we improve in the - as today's meeting illustrates, we improve the settings for business and that we ensure that our economy keeps growing strongly but with inflation kept in check and interest rates as low as possible.

There's a whole range of external factors out there. Obviously what goes on in China is of considerable importance to Australia as well so I wouldn't speculate about what this means for Australia's economy other than to say that I hope for the sake of our economy, and for Americans that the US authorities have got their decisions right. They're clearly seriously concerned about the prospect of a downturn. Time will tell as to how effective they are.

But we're not going to engage in commentary on whether they've done the right thing or the wrong thing by Australia. Our job is just simply to manage the Australian economy with the interests of the Australian people at heart.

QUESTION: Mr Tanner, how is the spending cut program going? How is the razor gang going through its work?

LINDSAY TANNER: It's early days. And we're obviously engaged in a lot of initial exploratory work. Because there is a huge amount of basic pack work that is involved in pursuing spending cuts, because discussions have to go on within the bureaucracy. Possibilities have to be teased out, examined. There is often issues underneath that you need to fully inform yourself about before you can proceed with a particular proposition.

So a lot of that work is occurring. But the real substance of the work will tend to occur in the February March period, leading up to the budget. That is when the hard decisions will have to be taken. But inevitably, a lot of the initial work is occurring now.

The target we have set ourselves means that the outlays for the forthcoming financial year are going to have to be cut by $3 billion or $4 billion. Possibly even a bit higher, but certainly a very substantial amount. That's a big task.

We have set the bar pretty high. And there will be pain. There inevitably will be pain when you cut spending. But it is critical that we get inflation back in check.

If we allow the inflation genie out of the bottle, we will have really major economic problem in this country, and it will be very difficult to get it back in check.

The time is now. We have got to act now to ensure that we keep inflation in check, and that we keep downward pressure on interest rates.

So we are prepared to wear the political pain that will inevitably come from making serious spending cuts, because it is in the wider interests of the Australian people, it is in the wider interests of the economy. Because at the end of the day, what matters most to people is things like how much they are paying in the supermarket, what they are paying on their mortgage, all of the costs that everybody has to deal with in their ordinary lives.

So although we will cop some flak for some of the spending cuts, they will be necessary to relieve the burden on ordinary working people in this country that inflation and higher interest rates provides.

QUESTION: Would it be fair to say that the $1.4 billion cuts are to anticipate re-election for '08-'09. They were the ea… relatively easy cuts to make, so the ones you're looking at now, another three, four, maybe more, is a lot harder, both politically and also with the party itself.

LINDSAY TANNER: To some extent, that's true, that inevitably, there were some things that we identified in Opposition that were perhaps less political painful than some other options might be. But it's also important to keep in mind that a major constraint in Opposition is lack of information: that we could only proceed with proposed spending cuts in Opposition that we were absolutely certain and clear about the proposal and the amount of money involved.

And in some cases, we just didn't have enough information to proceed. So in a general sense, what you say has some truth in it. But by and large, we're likely to be pushed towards areas that will be politically controversial. But that's not automatically going to be the case, because in some cases, there are issues that we simply couldn't address in Opposition because we didn't have enough detailed information to be confident that we would be putting forward an accurate proposal in order to ask [indistinct].

QUESTION: [Inaudible question]

CRAIG EMERSON: Oh well, the demand in Australia is still pretty strong. The China boom is continuing, and what we need to do, though, is make sure that Australian business - not only the mining sector, but manufacturing and service industries - are highly competitive. It's a tough international market. And we can make a real investment this year into the competitiveness of Australian industry by reducing the regulatory burden on Australian business, lifting its productivity through the sorts of reforms that we have been debating, and reaching a high level of agreement on in the meeting there today.

I'd say on the 10 regulatory hotspots in Opposition, when we're in Opposition, we expressed concern about the lack of progress on those 10 regulatory hotspots. But we didn't have inside knowledge on exactly what was happening in each. Now that we have better knowledge - and we are still inquiring - I think our concerns were well and truly justified. The progress on the 10 regulatory hotspots has been quite disappointing.

I think that's in part due to the confrontationist attitude of the previous Treasurer. And the Prime Minister, I think, got very heavily distracted in an election year. So these were supposed to have been agreed at the April 2007 COAG meeting. But in many cases, it was an agreement to agree, rather than actually getting them done.

So we will need to make sure that we accelerate progress on those 10 regulatory hotspots, expand the agenda out - as Lindsay has already indicated - and get our priorities right, so that we can reform those areas of big business regulation that have the greatest impact on

competitiveness and productivity.

QUESTION: Do you think that a payroll tax is [indistinct]?

CRAIG EMERSON: It's not for me to argue the rate of payroll tax. And this is the very point that I was making. States go to elections every three or four years. They put forward their policies, including payroll tax rates. I think it would be simplistic - and no-one is seriously suggesting it, but I'm using it as an illustration. When people say, oh, well, can't we just have one rate of this, or

one regulation covering all, where that is the smartest outcome, yes. Do it. But don't penalise diversity and innovation.

What we're trying to do is make life easier for business.

That's what really is going to be guiding us. Lift productivity, lift competitiveness, and find out, through proper sophisticated thinking, as what is the best way of achieving that in relation to each area of regulatory reform.

QUESTION: Minister, are you going ahead with the [indistinct] indexation as planned?

LINDSAY TANNER: Sorry, what did…?

QUESTION: Cigarettes, alcohol taxes.

LINDSAY TANNER: Obviously, I'm not going to comment on any prospective changes, but - because the [indistinct] of taxation is not my responsibility. So you would need to speak to the Treasurer, Wayne Swan, on those matters.

But I am not aware of any proposals, any of those matters [indistinct] change their longstanding arrangements.

CRAIG EMERSON: Thank you very much.

QUESTION: [Indistinct] got a press release…

LINDSAY TANNER: Hey? Okay. I've just been advised that the Leader of the Opposition, Brendan Nelson, has stated that the incoming Government was handed an economy in first-rate condition. How out of touch can he possibly be? We've got inflation pushing up, pushing prices up for ordinary working people. We have got interest rates that have been steadily rising, and obvious concerns about what that will mean for mortgage owners. We have got a budget where Government spending has been running way too fast, and where a major task is there for the incoming Government to get spending under control.

So while there are plenty of good things about the Australian economy, like the mining boom, the suggestion by Dr Nelson that the incoming Government has been handed an economy in first rate condition just shows how out of touch with the lives of ordinary working Australians he is.

We've got some serious problems we've got to address. We're rolling up our sleeves to tackle those problems. Dr Nelson obviously thinks that nothing is wrong, everything is perfect, and the former Liberal Government was absolutely fantastic.

They got voted out. It's about time they understood why they got voted out.

CRAIG EMERSON: Thank you, folks.


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