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Transcript of doorstop interview: Canberra: 4 April 2012: Treasurers’ Ministerial Council; GST Review; NDIS; Treasury staffing; Australia Network; state royalties; Craig Thomson

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THE HON WAYNE SWAN MP Deputy Prime Minister Treasurer


4 April 2012


SUBJECTS: Treasurers’ Ministerial Council, GST Review, NDIS, Treasury staffing, Australia Network, State royalties, Craig Thomson

TREASURER: Well, it’s good have all of the state Treasurers in town today. It’s good to see a few new faces. Some of them are familiar to me. We had a good meeting this morning. The fact is that I’m in the cart completely for working with all of our state treasurers to keep getting the good economic outcomes that Australia is getting. We had a long talk this morning about the economic outlook, trends in the economy, particularly trends as they affect budget revenues for example.

We had a constructive discussion over and beyond the economic outlook. We went through a range of issues to do with GST distribution and so on and, as you know, these are always issues on which there are divergent views in the room amongst state treasurers. They represent particular interests when they come here and my job is to represent the national interest, but we had a pretty good discussion about the issues of GST distribution as well. So, all and all, it was good to have them here. We didn't agree on everything but the one thing I can certainly say is I remain committed to working with the state Treasurers for a strong economy well into the future, irrespective of where they come from.

JOURNALIST: Treasurer, the states want to see the draft report of that GST review. Why won’t you give it to them?

TREASURER: Well, we will give them the draft report of that review. We’ve only just received it ourselves and I have made the commitment this morning that there will be plenty of time for us to have a subsequent meeting to talk not only about the draft report, but also to talk about the final report. So I wouldn’t get too exercised about a draft report. We commissioned this report. There are very important issues at stake in terms of this independent review of the GST distribution formula.

Historically we’ve employed what is called horizontal fiscal equalisation; what that has meant throughout our history is that the stronger states have always supported the weaker states to develop. You wouldn’t have the modern state of Queensland or the modern state of Western Australia if it hadn't been for the strong support given to those states by the likes of Victoria and New South Wales.

Now, over time those strengths change and of course the economies of Queensland has grown much more and the economy of Western Australia has grown much more. So the reason we commissioned this review was to take all those factors into account so we could have a further discussion with the states and the Australian community about the formula as we go forward.

In that room there are divergent views. You won't get all Treasurers agreeing on the outcomes of these independent processes. It’s never been any different and it won’t be any different in the future. The job of the Commonwealth here is to represent the national interest and that’s what we do.

JOURNALIST: Treasurer, did you discuss the NDIS? Could you get any in-principal support for that at all?

TREASURER: Look I think it’s pretty fair to say that the Commonwealth has said that we support the recommendations of the Productivity Commission and we are looking at how we can progress this fundamental issue of fairness for Australians with a disability. For too long Australians with a disability have been locked out of our community. The level of unmet need there has been great. Too much injustice has been visited upon Australians with disabilities.

So the Commonwealth is very committed to moving forward with a scheme, the likes of which has been recommended by the Productivity Commission. But it’s a big task so we’re going to take our time to study all of those recommendations and after we’ve done that we will announce what we intend to do. Of course when we’ve come to those conclusions we’ll have an extensive discussion with the states. We’ve already commenced that discussion with the states through a select committee of COAG, a meeting of which I went to over a month ago.

So the states, I think it’s pretty fair to say that they have embraced the concept, but they want to have a further discussion about implementation issues, scheme design, and so on. When the Commonwealth has completed all of its deliberations about those issues, it will have a broader conversation not just with the states, but with the whole Australian community about how we can do this thing together.

JOURNALIST: Were you able to appease any of their concerns about how it will be funded? I mean, it doesn't sound like you did.

TREASURER: Well, there’s a lot of work to be done here and the states have a very big investment in disability of well over $4 billion which the Productivity

Commission is recommending be rolled into the scheme. These are all very big and complex issues and at the appropriate time we’ll be having those discussions with the states.

JOURNALIST: A letter has gone out at Treasury asking for about 200 voluntary redundancies.

TREASURER: There are some letters that went out in Treasury in terms of voluntary redundancies quite some time ago. There’s nothing recent about that.

JOURNALIST: Mr Swan, will the states have to do more in the future to extend their taxation in order to guarantee the (inaudible)?

TREASURER: Look, there’s been a bit of commentary about this this morning. I will make some comments about revenue. As you know, commonwealth revenues are down about $140 billion on what we expected back in 2008-09. That’s the consequence of the global financial crisis and the global recession. We think they’re going to be down further; that was the subject of the speech that I gave in Sydney to the business economists last week. The sort of factors that are affecting commonwealth revenue are also affecting state revenue.

So what we have to see in this environment is responsible budget management. That’s what the Commonwealth is doing. Our determination to return to surplus in 2012-13 is based on our assessment of the economy which is growing around trend, which has an unemployment rate of 5.2 per cent and which has a very strong investment pipeline. It will be incumbent upon the states in this environment to do what the Commonwealth is doing which is responsibly managing this budget.

Just on Commonwealth funding of the states, we are funding the states to tune of $7 billion extra per year over and above what they received from the previous government. So Commonwealth funding of the states has been very strong in recent years and the states were extraordinary beneficiaries of stimulus payments that we made which gave new investment in a whole range of state facilities.

So the Commonwealth has been a strong funder of the states, but the states are not immune from the revenue write downs I’ve spoken about. It’s happening to Commonwealth revenues and state revenues and they’ll have to handle their budgets responsibly in that environment.

JOURNALIST: What about Mike Baird’s idea of quarantining part of income tax revenue for the states in return for them cutting stamp duty?

TREASURER: So he wants us to cut the Commonwealth budget. We won’t be doing that, you’d be surprised to hear. The fact is that we’ve got a process in place where the states are going to sit down and Mike Baird is going to sit down with Jack Snelling,

taking the place of Andrew Fraser, to work through at least a harmonisation agenda when it comes to state tax regimes across the Commonwealth.

JOURNALIST: (Inaudible) the problems on your budget in trying to balance for the states as well. But in the case of WA, the GST carve up has gone down to 50 per cent. GST takes it down 55 cents for every dollar in GST. That cannot possibly be fair to the people of WA, surely.

TREASURER: Let’s just make a couple of points about this. Number one, the first and most important point here is that when it comes to Commonwealth payments to Western Australia, they get about 80 cents in the dollar back because GST are not the only payments. So they get far more than 50 cents in the dollar, but it is true that’s where it’s got to in the latest assessment under the formula.

It was because of the concerns of WA that we appointed the committee which is looking at the GST distribution. That’s very important to recognise. We recognised that case that Western Australia had made and other states agreed with, particularly Queensland, that we should go back and have a look at all of the arrangements. That’s what we're doing through the Brumby committee.

JOURNALIST: Treasurer, the Auditor General has been critical of the Cabinet handling of the Australia Television Network matter. Do you take the criticisms on board and what exactly were the factors at play that caused such confusion?

TREASURER: You can go through the Auditor General's report if you like. We’ll take the lessons out of it and we will learn from that, but the point is at the end of the day the Government made the right decision here and I don’t make any apologies for it whatsoever.

JOURNALIST: But the process looks like it has been incompetently handled, hasn’t it?

TREASURER: Well, that’s the tag that you use. I don't accept that at all. There were events that occurred through the process here, namely some of the information becoming public when it shouldn't have. Those sort of complications were regrettable.

JOURNALIST: But even Government processes. I mean, there was no clear information about who would make the final decision.

TREASURER: Well, there were some changes in that regard. They have been commented on by the Auditor. I don’t intend to add to that.

JOURNALIST: Treasurer, did you have any discussions on state mining royalties and what was the message to the state Treasurers about mining royalties?

TREASURER: Well, you see all those issues are all tied up with the GST distribution formula. You see, the decision by Western Australia to increase its royalties

has resulted in less money for Western Australia and more money for New South Wales and Victoria. The end result of the decision taken by the Western Australian government to jack up their royalties is to see that revenue stream distributed to other states across Australia and that was precisely the point that I made to the West Australian Treasurer today and that is why, in terms of the report from Mr Brumby and his colleagues, that these matters are pertinent to their considerations.

JOURNALIST: Do you have full confidence in Craig Thomson, Treasurer?

TREASURER: Well, he is entitled to the presumption of innocence and of course I do.

JOURNALIST: Mr Swan, just on the issue of Craig Thomson, Tony Abbott was saying today that the report on the Fair Work Australia report should be released and he cited as a precedent the Fitzgerald report which you will recall, and what do you think of the comparison?

TREASURER: Wouldn’t it be good if Tony Abbott just had something positive to say about an area of policy instead of all this negative campaigning that he's up to. The point is this - there are independent processes in place and he can't have it both ways. He can't on the one hand call for us to not have anything to do with it and then on the other hand say we should. This is just completely contradictory and it is the ultimate in negative campaigning from Tony Abbott.

JOURNALIST: Do you have full confidence in Craig Thomson.

TREASURER: I’ve answered that question.

JOURNALIST: (Inaudible) tabling of the report in Parliament?

TREASURER: I beg your pardon - the consideration of this report is entirely up to the authorities independently. They’re going through their processes at the moment.

JOURNALIST: But it’s up to the Government…

TREASURER: Hold it, you’re putting the cart before the horse. We have some reports. They are before independent authorities. It is entirely up to them to deal with those reports. When we’ve seen the conclusion of that then we’ll make those judgements. Thanks very much.

JOURNALIST: Why do you have full confidence in Craig Thomson?

TREASURER: Because he’s entitled to the presumption of innocence.

JOURNALIST: The national executive of the ACTU (inaudible)?

TREASURER: That is a matter for the ACTU.

JOURNALIST: (Inaudible)?

TREASURER: I couldn’t give you the exact figure, but the Treasury will be able to tell you that, because I don’t take these decisions in the Treasury and that is as it should be. Thanks.