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Transcript of interview with Fran Kelly: ABC Radio National: 27 June 2011: European debt concerns and global outlook; carbon price assistance; battlers’ buffer; unfunded Liberal tax announcements; coal industry outlook

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THE HON WAYNE SWAN MP Deputy Prime Minister Treasurer


27 June 2011


SUBJECTS: European debt concerns and global outlook; carbon price assistance; battlers’ buffer; unfunded Liberal tax announcements; coal industry outlook

KELLY: Wayne Swan, good morning.

TREASURER: Good morning Fran, it’s good to be with you.

KELLY: Before we get to the carbon tax, Treasurer, there’s plenty of alarm at the moment that we’re about to see another global financial crisis. As Federal Treasurer, what’s your analysis of the risk of another GFC?

TREASURER: Well, certainly Fran, there are challenges in Europe. We were in this position last year. We’re back there again this year unfortunately. But, Fran, fortunately for Australia we are in the right place in the world. Asian economies are still growing strongly and of course we have a very resilient economy here. Our growth prospects are strong and prospects in the region are strong but of course events in Europe are of some concern, and as you would be well aware economic results and outcomes in the United States in recent times have also been soft. So that is generating some uncertainty in terms of international markets but Australia’s position remains strong. People should never forget that we came through the global financial crisis and the global recession in the best shape of any advanced economy, and our economy is very resilient and our financial system is strong.

KELLY: So our economy is resilient and strong but are you seeing firsthand how this negative global sentiment starting with Greece and other places is feeding into our economy?

TREASURER: Well, we’re certainly seeing impacts in world markets but when you look at the Australian economy, when you look at our region, we are quite resilient but we’re not immune from the fallout. So I don't speculate about what’s going on in markets. We’re certainly not immune but we are in a far better position in this region of the world.


KELLY: Can we go now to your promises of compensation for a carbon tax. You’re offering nine out of ten families compensation for the tax. How many of those families will get full 100 per cent compensation?

TREASURER: The vast majority will get that Fran.

KELLY: Does that mean five million families or…?

TREASURER: We will go through all the detail when we publish the final outcomes from our negotiations on the Multi-Party Committee but we are absolutely determined to assist households. We’ve made that clear from day one. We’ve said that over 50 per cent of the revenue from this price on carbon will go to assist households. We understand that Australian households are under financial pressure and it’s very important in this environment to make sure that we provide assistance, not just in terms of tax cuts, but also in terms of additional family assistance and/or increases in pensions, because as you would understand Fran, there are a wide variety of circumstances out there and of course around 3 million households on low incomes will get a battlers’ buffer. We think that’s pretty important because if you’re on a low income you do spend a much higher percentage of your income on energy and of course your room to move is so much smaller. So we think it’s pretty important to provide that reassurance. These principles are very important.

KELLY: Tell us about the battlers’ buffer. This is 20 per cent on top of whatever the Government gives them to adequately compensate for the carbon tax, is that right?

TREASURER: That’s right, over and above the average impact, but of course you see many people’s circumstances are different, and of course if you’re on one of the lowest incomes you don't really have a lot of room to move, and small increases in price can have a very dramatic impact on your household budget. So we think it’s important to put that 20 percent buffer in for those on the lowest incomes and that’s what we’re going to do.

KELLY: The problem is a lot of people listening find it difficult to understand what this really means because you can’t talk dollars yet because we still don't know the details of the tax.

TREASURER: No but we are going through an extensive process here. We’ve been consulting with the Multi-Party Committee, we’ve outlined a framework. What we’re doing is outlining the principles. There will be a revenue stream and the money will come from the 1,000 largest polluters. We want to use that revenue stream to help households as well to assist industry. So it’s very clear there will be a revenue stream and that stands in stark contrast to Mr Abbott who has gone out there and said that he’s going to provide tax cuts but can’t say how he’s going to fund them. The fact is that what we are doing in putting

together this package of assistance is vital to ensure that people can be reassured that assistance will be there.

KELLY: Well, Tony Abbott says and I’m quoting him now: ‘The compensation will happen once, but the tax will just go up and up every year.’ He’s right isn’t he, in the sense that the tax will have a starting price but it will rise every year until we switch to an emissions trading scheme. Will the compensation be indexed?

TREASURER: Tony Abbott is running an outrageous scare campaign. He…

KELLY: But is that true or not though?

TREASURER: Well, of course it’s not true. It is absolutely untrue. It will be proven to be untrue when all of the details are supplied, and we’ll be happy to get them out there when we’ve finalised all of the arrangements, but Tony Abbott is going to tax Australian families on average $720 a year and give that money to the big polluters. What we are doing is the reverse of that. What we are doing is charging and putting a price on carbon for the 1,000 largest polluters, using that revenue stream on the one hand to assist households and on the other to assist industry. There couldn't be a clearer contrast here.


KELLY: Well, Tony Abbott’s making an even clearer contrast. He says he’s going to give tax cuts without a carbon tax.

TREASURER: But Tony Abbott doesn't have the capacity to give tax cuts.

KELLY: Well, they’re going to say they’re going to do it by smaller government and efficiencies.

TREASURER: Well, that is all code for Tony Abbott saying that he’s going to engage in massive cuts to spending, massive cuts to health and education. Tony Abbott went through the last campaign and defied the Charter of Budget Honesty, refused to submit any of his costings to the Treasury and when the news came out in the wash after the election when Treasury and Finance looked at his figures there was found to be an $11 billion black hole. Now the fact is we will make the Treasury available to Mr Hockey and to Mr Abbott to cost their policies so all Australians can understand how accurate Mr Abbott’s statements are. The fact is…

KELLY: And will you release all the Treasury costings of your policy when you announce the policy? Will we get all the Treasury modelling for that too?

TREASURER: Yes, you will see all of our detail in full. I can’t wait to get it out there Fran. It’s very important because Mr Abbott has been running around the country trying to scare the pants off everybody, running this outrageous scare campaign that is not based on fact. The truth is this; he cannot give tax cuts unless he says how he’s going to fund them. He can't tell us how he’s going to fund them, but if he goes down the road he went in the last election they could only be funded by massive cuts to health and to education.

KELLY: It’s difficult for voters to make sense of these promises without costings. I think Shadow Finance Minister Andrew Robb made a fair point earlier in the program when he said why not get the Parliamentary Budget Office up and running. That was agreed, it was agreed by all sides of Parliament. There’s money for it. Why don't you get that going?

TREASURER: Well, because we are getting git going. We are getting it going, but in the interim Mr Abbott has said that he’s going to provide substantial tax cuts. He can’t tell anybody how he’s going to fund them. If in fact they’re unfunded, then under the Liberal Party if they were in power, the country would be swimming in a sea of red ink, and of course nothing could be worse for this country given the international circumstances that you and I discussed before, that a party who was prepared to send the country deeply into deficit over the forward estimates. That’s where Mr Abbott and Mr Hockey are right now.

KELLY: All this political exchange over tax cuts is one thing but business - the Australian Industry Group and the Australian Chamber of Commerce and Industry - are calling on Labor and the Coalition now to refocus rather than just one-off tax cuts, to refocus on overhauling the tax and transfer system - real tax


TREASURER: Well, we are very much focused in that area, Fran, have been focused in that area for some time. [We] have put in place substantial reform in that area and certainly we’re going to go through the year, we’re going to have a tax forum later in the year. We certainly are focused in that area. It’s terribly

important for the future. I agree with them. We do have an approach to all of these issues unlike the Liberals who are simply an empty vessel.

KELLY: Over the weekend Senator Brown said that once a carbon tax is in place we are going to see and quoting him: ‘going to see some of the most polluting enterprises have a struggle. This has to be the outcome. The coal industry has to be replaced by renewables.’ Now just a few weeks ago Martin Ferguson told this program that some coal mines would have to close once a carbon tax is in. Has your Treasury modelling indicated yet how many coal mines might have to close?


TREASURER: Well, I’ll be publishing the Treasury modelling in this area in a few weeks time Fran, so I’m not going to pre-empt all of that. But I’ll say this about the coal industry: the coal industry will continue to grow in Australia and that is why there is a massive investment pipeline into coal and other commodities in the years ahead. The truth is we need a price on carbon so we can drive the investment into the innovation which is going to give us on the one hand the clean coal technologies we need to reduce carbon pollution and also give that real incentive to invest in renewable energy. That’s why we need a price on carbon. We agree with the Greens on that, but what we don't agree on is this fact: the fact is that as we go forward to the future, in addition to tremendous investment in renewable energy, which will be a greater proportion of the power that we use, we will still need to rely on energy produced by coal and the world will still need to rely on energy produced by coal, and that point is made by people like Stern and many other reputable economists. We’ve got to change the energy mix towards renewable energy, but coal will still be required in this country and around the world for a long time to come.

KELLY: Treasurer, thank you very much for joining us.

TREASURER: Good to be with you.



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