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Election '96: Deputy Prime Minister and Shadow Treasurer discuss Coalition measures to cut expenditure

ELLEN FANNING: Two weeks out from the election, with a handy lead in most opinion polls, John Howard has laid his cards on the table. After months of persisting with a cautious political strategy, Mr Howard yesterday unveiled a plan to cut government spending by more than $6 billion over three years in office. $1.7 billion would be pruned in the first year, with the cuts focusing on cracking down on social security fraud, making migrants wait two years before they can receive welfare benefits, and shedding 2,500 public service jobs. In a moment, we'll hear how those measures have provoked Australia's peak welfare lobby, but first to the Government, which has been accusing John Howard of trying to slide into office without tackling tough policy issues. The Deputy Prime Minister, Kim Beazley, is in our Sydney studio this morning, and to speak with him, our chief political correspondent, Fran Kelly.

FRAN KELLY: Kim Beazley, you've been saying that John Howard's hiding from the electorate. Well, he's not hiding any more, is he? He's shown the country how he'll pay for his promises and deliver a $6 billion improvement to the bottom line of the Budget within three years. He's being daringly honest in fact. Doesn't that blow your best line against him?

KIM BEAZLEY: No, he's not being daringly honest, he's being glowingly over-claiming. And the figures that he has don't stand up to scrutiny, they are shonky. Now, I don't go to the social justice issues involved in any of those figures; other people can raise those. But the figures that he has presented on public sector savings are shonky figures, unachievable, the biggest hole, of course, being the nonsensical notion that you could sell a third of Telstra in the space of 15 months, and all this public debt interest savings are, of course, reliant upon that. But when we go down through the individual items on public sector savings, almost every one of them are unbelievable.

FRAN KELLY: But, Mr Beazley, the cuts that John Howard's proposing towards the public sector is something like a 2 per cent across-the-board cut. Can't a massive structure, like the public service, handle that?

KIM BEAZLEY: Well, you've got to remember that they've been subject to a one per cent efficiency dividend from us since 1987, that there were further efficiency dividends imposed on them by us in the last Budget. So you're coming off the top of that. You're not talking about 2.5 per cent on nothing; you're talking about .. or his cuts or nothing .. you're talking about cuts on very substantial cuts to this point. The public sector is not bloated. I mean, I go through to Geoff Prosser, his finance spokesman, in their spasms of honesty when he said this last year: They've (that's us) had the efficiency dividend running for a while now. It's not true any longer to paint the public service as bloated and inefficient and without thought or ideas. That's just not true any more.

And when you go to the individual items, take the immigration item, and I won't go into the social justice elements of the immigration item, I'll go into the costing. Six months saves about 30 million. That's the six-month inability to make a claim, that we have in place at the moment. John Howard claims that two years produce 250 million. Now, set aside the fact that a substantial number of people do, of course, find work after six months, but all the estimates that we can come up with, as we go through that as the maximum possible saving would be 90 million by that process....

FRAN KELLY: So you're saying their costings are just wrong?

KIM BEAZLEY: They're just wrong. So that's 180 million blown out straightaway. Then we go to the work test. Now, what do they say about the work test? And I'm not going to the social justice issues concerned here. They say that there is going to be 118 million per annum from stricter enforcing of the activity test, and if you actually look at what that means is you have to make an assumption that 26 per cent of unemployed people, 202,000, are actually acting regularly in breach of the work test. That is an absurd assumption....

FRAN KELLY: But even you said you could save some money by tightening up social security.

KIM BEAZLEY: Oh, yes. Look, we have been tightening social security fraud for a very considerable period of time, and that's why we say that the sorts of figures that they're claiming here on social security fraud are absurdities, they simply would not get those sorts of funds from them. But that's the point, you see. It's all very well to say....

FRAN KELLY: But let's look at this politically, Mr Beazley. I mean, cutting the public sector will get a cheer from most people, except public servants; tightening up on social security fraud will be popular; so will penalising migrants who come here, given there is resentment in the community, in some areas of the community, that people are coming here and taking our jobs and bludging off our taxes. I mean, politically, this document is smart, isn't it?

KIM BEAZLEY: Well, whatever he might say about the politics of it, what my job is to do is to go to the accuracy of it, and there will of course be people who object to the cruelty entailed within it, but what I am here to object to, as Finance Minister, is the absurdity of the costings. That's the point. You cannot realise the savings that he is talking about, and if you cannot realise the savings he is talking about, were he to be elected to office, the first problem that he would confront is that he could not pay for his promises. Now, we don't know what all those promises are, of course, because they've not all been revealed to them, but I can say this: if the costing on his promises is as bodgy as the costings on his savings, then what he is going to present is a ludicrous heap of unachievable objectives. Now, I....

FRAN KELLY: But if Australians believe this document from John Howard, it'll show to them, won't it, that John Howard is much better prepared to deal with the Budget black hole, the deficit that all the analysts say is waiting there in the next year's figures? It shows that he's much better able to deal with that than you are.

KIM BEAZLEY: If the Australian people believe this nonsense and were to elect him on the basis on it, the Australian people would come to be very sorely disappointed in the capacity of his government. That's the point I am making here. I mean, we would never be allowed, if we put out a set of costing documents based on these shonky figures, if we were to put those out, we would be blown away. Now, what we will ask, over the next couple of weeks as we produce persistent analysis and updates on his shonky figures, is that the media do their job of analysis and not just enthusiasm, and when the media do their job of analysis on this, Fran, this package will blow apart.

And I haven't even discussed here the absurdity of the proposition, at the period of time that you're massively slashing the asset sales task force, then you're going to get Australia's biggest company up to a float in 15 months flat. The notion that you'd even get legislation through - assuming you did not have a recalcitrant Senate - the notion that you'd even get legislation drafted and through within 15 months is an absurdity. But when you go through the due diligence process associated with Telecom, when you go through all the litigation that they've entered into, which you have to calculate, when you go through the risk that would have to be calculated before you put it on the market, you would have absolutely no chance of achieving these savings in anything under three to four years, if then.

FRAN KELLY: Kim Beazley, thank you.

ELLEN FANNING: Well, the Shadow Treasurer, Peter Costello, wants to respond to what Mr Beazley has been saying this morning. He's on the line now. Once again, Fran Kelly in Canberra.

FRAN KELLY: Peter Costello, are these figures shonky? Can you deliver them or have you overblown them?

PETER COSTELLO: Of course we can deliver them. What we're talking about here is we're talking about savings of about $1.7 billion. They're easily within the ball park; they're quite achievable. We're talking about public sector running costs of something like 2 per cent. That's in running costs, just in administration alone. And I must say, I nearly choked when I heard Mr Beazley say he would never get away with something like this. Let me tell you, identifiable, explained expenditure reductions. His funding mechanism in this election is $800 million of taxes from 100 people, which he hasn't been collecting for the last 13 years.

FRAN KELLY: But the Government's not using that to pay for their election promises.

PETER COSTELLO: No, this is....

FRAN KELLY: That's not factored in.

PETER COSTELLO: ... his sole funding. This is his sole funding in....

FRAN KELLY: No, there are other cuts that they explained, just as you did last Sunday.

PETER COSTELLO: Fran, it's the sole funding, in relation to the deficit. He says there are a hundred people not paying $8 million worth of tax each, and we've just discovered it. And, as senior tax officials have said today, it's like saying: We're going to go and raid a warehouse and we'll be around there in three months. They said that the Prime Minister, by announcing this before making the announcement in the Parliament about the legislation, has basically just said to those people, if they exist: Get around and reorganise your affairs.

FRAN KELLY: Well, Mr Costello, let's look at your plan this morning. That's what we're here to do. There's been a lot of criticism in the newspapers, a lot of commentators criticising it, especially the planned welfare cuts. How do you defend those cuts, given that some of them are the same sort of cuts that were listed in Fightback, the Australian people rejected then?

PETER COSTELLO: Well, look, well let's take the migrant waiting period.

FRAN KELLY: $616 million over three years by keeping new migrants off benefits for two years.

PETER COSTELLO: Look, when people come into Australia, I don't think they come in with the intention of arriving in Australia and going on welfare. And, in fact, when people apply to come to Australia, under various parts of the immigration program, they have relatives or friends or businesses that undertake to support them. What we're saying is that those people who do give the undertaking to support them on the immigration application should do so.

FRAN KELLY: And if something goes wrong? There's a falling out, someone gets sick, someone dies, someone loses their job?

PETER COSTELLO: Let me make it clear. This would not apply to refugee or humanitarian programs who'd be eligible for Job Search allowances under....

FRAN KELLY: As is currently the case, yes. But what about if those people who come in with a guarantor and something happens?

PETER COSTELLO: Yes, it would not apply to people who have no means of support because the guarantor doesn't have the money or there's some dramatic change in circumstances. As we've said quite clearly in this document, there'll be a safety net, the special benefit will be available for those people.

FRAN KELLY: All right. Let's look at the public sector. Kim Beazley says that your efficiency savings are ridiculous. They've been tightening up every year since 1987. A billion dollars from government running costs. I mean, why wouldn't the Government have found that if they could? And why won't cutting that kind of money out of the public sector severely disturb service delivery?

PETER COSTELLO: Well, in relation to running costs, what we've said is, in a full year, about 150 million as a 2 per cent efficiency saving. Now, if you don't think you can get 2 per cent in public service savings - 2 per cent, $2 out of a hundred in relation to administration costs - frankly, you just haven't been trying hard enough. There are many businesses in Australia that have been having 20-30 per cent efficiency gains over the last couple of years.

FRAN KELLY: But I suppose if you add up that the efficiency gained since 1987, it would be close to that, wouldn't it, for the public sector?

PETER COSTELLO: They haven't, Fran. I mean, you know....

FRAN KELLY: Well, Mr Beazley just said they had.

PETER COSTELLO: Well, Mr Beazley just said a whole lot of things which were basically bluff and bluster because he can't pick this apart, and what was his final plea to you? Would you, the media, please pick it apart for us? I mean, you know, you the media overlook $800 million from 100 taxpayers and try and look at detailed, precise, explained expenditure measures, which have been put out there and which a government, as we want to do, that wants to build savings and not pay the pain of debt and tax on Australian people, will be able to achieve.

FRAN KELLY: Just finally, you've also said that you'll commit to the Government plan to scrap the tariff concessions scheme. That means putting a 5 per cent tariff back on some goods, yet you've promised no tax increases. Why isn't that a tax increase?

PETER COSTELLO: Well, this was a concession in relation to tariffs, which was available under certain circumstances. The Government announced that it would be withdrawing the concession and we said that we would also, but we would convene consultation....

FRAN KELLY: But that means some importers will be facing .. or some people will be facing a new tax, doesn't it? A tariff is a tax.

PETER COSTELLO: Well, Fran, the Government doesn't call it a tax. It didn't say: We're announcing a tax measure. It....

FRAN KELLY: But isn't tariff is listed under tax measures, under revenue measures in the Budget papers.

PETER COSTELLO: ... not listed as a tax, it's listed as a tariff. Tariffs are always in separate Acts, and most people would understand tariffs to be simply tariffs as distinct from tax, and....

FRAN KELLY: So they're not a tax on imports?

PETER COSTELLO: No, let me say what we've said we'll do because I think this is a big difference between us and the Government. It was done by the Government unannounced without any consultation. We said that we'll convene a consultative panel with the industry to deal with transitional arrangements. But more than that, it's important that those people who are losing a concession, which is what it is, have their cost structure reduced in other areas, which is very much our program of reform, so we can make sure we'll give them compensation. Compensation....

FRAN KELLY: Peter Costello....

PETER COSTELLO: ... terms of reducing their business costs in labour, transport, communications, and all those other areas which are so important to them.

FRAN KELLY: Peter Costello, thank you. And I think that Mr Beazley is still with us in the Sydney studio. Mr Beazley, if you are, would you like to make a brief final response to Mr Costello's comments?

KIM BEAZLEY: Fran, you asked him the wrong questions. You should have asked him how he justified $616 million of savings out of what he said he'd do about immigration, when the most generous estimate, and that is without including any of the issues of special benefits and the other payments that he would have to make, is that you'd get $270 million from it. How does he explain that $350 million hole? You didn't ask him the question: Mr Costello, do you believe that 26 per cent of the unemployed in Australia are engaging in activity test fraud? You didn't ask him that question. Because if 26 per cent are not engaging in activity test fraud, then there isn't $118 million worth of savings. You didn't ask Mr Costello if he thought, and the bulk of his savings of $691 million on public debt interest, if Telecom was not sold within 15 months, there'd be that public debt interest saving of $691 million immediately available. Because if it isn't, then it isn't available. Now, I've just given you a billion dollars worth of shonk. Now, that's the point. These figures are shonky. And the job is to ask questions about the shonkiness. I'm not going to go to the social justice issues, that's for other Ministers, but this is a further indication of the fact that Mr Costello cannot handle Treasury matters. He cannot handle finance matters because he doesn't know what he's dealing with.

The other question, which you did ask him, which is an absurdity of course, is the public sector is already being subject to a series of efficiency dividends since 1987, now has already imposed upon it in the last Budget a 2 per cent efficiency dividend. The public sector has, since we've been in office, employment grown by about 2.5 per cent when our population has grown by 17.4 and our GDP has grown by 51. This is the point: the point is, not that these figures are demonic and dangerous - that's for other people to say - the point is these figures are totally shonky, and there's no rationale for them.

FRAN KELLY: Well, Mr Beazley, I think we do have Peter Costello on the line, so I thank you for joining A.M. And Peter Costello, Mr Beazley's asked the question that he says I should have asked. Just on one of those questions, your response to his claim that $616 million over three years by keeping new migrants off benefits for 2 years isn't achievable. He says it's more something like $230 million. I mean, could your figuring be wrong?

PETER COSTELLO: Oh, no, no. The figuring has been completely checked and is quite accurate.


PETER COSTELLO: ... important .... been verified by his own departments.

KIM BEAZLEY: Oh, nonsense.

PETER COSTELLO: You see how he sort of turns everything into personal abuse and bluster. At the end of the day, what proves he can't handle finance matters is his record....

KIM BEAZLEY: I would have thought, Peter, I was being .. I thought, Peter, I was being absolutely straight up and down, asking you the questions.

PETER COSTELLO: ... by 1.7....

FRAN KELLY: Mr Beazley, we're going to have to wind this up now, so I think we'll just give Peter Costello a sure chance to respond. Mr Costello.

PETER COSTELLO: I appreciate that because the fact is that, over the last four years, government debt has risen about three times. The results of this government in relation to public administration, and expenditure are there for all to see. It has been a failure, it has run up debt, it has run up deficit, and in relation to moderate and carefully-explained matters, there is a chance to relieve Australians of some of the debt and tax burden of Labor, and that's what this document does.

FRAN KELLY: Peter Costello and Kim Beazley, thank you very much.

ELLEN FANNING: And Fran Kelly in Canberra was speaking this morning to the Deputy Prime Minister and Finance Minister, Kim Beazley, and the Shadow Treasurer, Peter Costello.