07-February-2012
Portfolio Media Releases
Topics: Budget surplus, tax cuts, Labor’s debt, dams and water management.
E&OE
LYNDAL CURTIS:
Tony Abbott gave a speech last week outlining the sorts of things he’d like to do in government. A lot of it was predicated on the Coalition returning the budget to surplus. Assuming you’re right, and Labor doesn’t manage to get the budget back to surplus, when would a Coalition government get the budget back to surplus, assuming you are elected in the second half of next year?
ANDREW ROBB:
Well, bear in mind that if we have an October election in 2013, we’re still two budgets away and who knows what the state of the books will be at that stage. The Government just in the last budget predicted the deficit which has now grown by $15 billion in the space of six months. They predicted net debt of I think $96 billion and it’s now, they’re now talking of something up around $130 billion. So the numbers are collapsing on the balance sheet, badly, in the space of the last six months. We’ve seen the four biggest budget deficits in the country’s history.
LYNDAL CURTIS:
With all that then, could you see a Coalition government in a first term delivering a surplus?
ANDREW ROBB:
Well it just depends. As I say, there’s so much uncertainty around the numbers. Treasury and the Government have been so demonstrably wrong, and always in the wrong direction, making things worse, and I think we’re starting to see unemployment, I really fear this year will be the year of unemployment.
The only way in which companies are now left to maintain profits, they’re saying to me, is to shed the labour face, so we’ve got all these things coming at us. It’s very hard to predict. That’s my point because this government has got no idea, so two budgets out, it’s very hard to predict.
LYNDAL CURTIS:
Is the promise to deliver tax cuts contingent on there being a surplus first?
ANDREW ROBB:
No, we will deliver tax cuts in the first term because we’ve got to do a combination of trying to kick start consumer spending. We’ve got to try and unlock what is a very huge pool of cash that is sitting in most companies around Australia but they are not investing because they can’t, they don’t have the confidence. There is a crisis of confidence. They see no direction from the Government. They’ve got no idea, really, where are they taking the country. What will Australia look like in two years’ time? How weather proofed or fire-walled are we against a collapse in Europe? They do feel a great vulnerability because the Government has not given anyone confidence that they know what they’re doing. So all of these things, we have to restore confidence and part of that is on the revenue side, you know, and part of it is on the cost side but we have to certainly restore the confidence of people to spend money or to invest money.
LYNDAL CURTIS:
So are those tax cuts going to be aimed at being delivered early in the third term or are looking to later – earlier in the first term, or are you looking into later in the three year term?
ANDREW ROBB:
The timing, again, will be a function of what’s possible, the state of the books, I don’t want to be prescriptive because as I say, we’re still two budgets away to make any sort of really considered position on that but we will have tax cuts in the first term. But we’ll also, we will be winding back the amount of government in our lives and that’s not just spending, it’s also regulation. That’s one of the things which is not properly appreciated, that one of the things about this government is it has seen such an acceleration of regulation.
I think we’ve got the greatest growth of government in our lives, including the spending, but very muchregulations than we’ve seen in our lifetime.
LYNDAL CURTIS:
With a commitment – some questions over achieving the surplus target with what you think you might be left with, with Labor, with spending money on tax cuts and any tax cuts, even small ones, cost billions of dollars over the forward estimates. Can you see yourself paying off debt during that time, too?
ANDREW ROBB:
Well, we’ve got to get into surplus and again, you know, if you took the Government’s projections even last May, you would be a lot more optimistic about what could be done if we took office after 12-13 but in the space of six, seven, eight months, all of that’s gone out the window. I mean, the books are in demonstrably worse shape.
The Government is now spending nearly $100 million more each year in the budget than was being spent in the budget when they took over, $272 now’s gone to $362 and rising. There’s been no, despite the stimulus, they didn’t bring it back. They stayed at that level and they’re now adding to it. So this is the most profligate spending government. It’s pushed up interest rates it’s had no direction…
LYNDAL CURTIS:
You say it’s pushed up interest rates but interest rates haven’t gone up for more than 12 months. The last time they were 4.25 per cent now, the last time they were that low was in 2001. That’s nearly 11 years ago. Tony Abbott spoke last week a lot about taking the pressure off interest rates. Isn’t the pressure off interest rates already?
ANDREW ROBB:
No, no. They’re not. The fact of the matter is that capital moves around the world, as you know and we all know, attracted to where the highest interest rates are in many cases, the fact of the matter is that our rates are much higher than most of the other venues that capital would flow into, mostly other big countries, developed countries.
LYNDAL CURTIS:
So where would interest rates ideally be on that basis?
ANDREW ROBB:
Well all I’m saying is if the Government hadn’t been, and is still in the market, for $100 million a day, they’re then competing every day, have done for years now, $100 million a day, against small business, medium business, large business, they have put pressure, upward pressure on interest rates. Interest rates are probably at least one per cent higher because of the way in which this government has managed the budget deficits.
The budget deficits, the four biggest in our history, all in a row, have contributed to interest rates being higher than they should be and therefore if we had one per cent off, they’re forcing the Reserve Bank to do all the heavy lifting and we’ll probably see it tomorrow, the Reserve Bank will be again forced to perhaps bring down rates when if the Government took pressure off their spending then interest rates would come down and…
LYNDAL CURTIS:
But either way, in that case, isn’t the Reserve Bank cutting interest rates, whether it’s the Government spending less and interest rates falling or the Reserve Bank thinking now that it should push down interests…I mean, either way, interest rates are falling and they have been falling under this government.
ANDREW ROBB:
But it’s not only the interest rates, but it is also the access to finance. You know, I could take you to hundreds of thousands of small businesses, but notwithstanding the interest rates which haven’t been coming off in small business. The cuts have not been passed on to hundreds of thousands of small businesses. It might have been passed on in mortgage rates and our interest rates are still, for the main part, many percentage points higher than our major competitors and part of that, part of that is because the Government here has been spending like drunken sailors.
If they’d got out of the market, finance would be cheaper for business, business would keep employing people, keep investing, have more confidence and householders would have more money to spend.
LYNDAL CURTIS:
If I could take you to a couple of other policies which haven’t yet been fleshed out, you’re looking at expanding the number of dams, particularly in northern Australia. Tony Abbott also talked in his speech last week about spending money saved on the NBN to reduce traffic congestion. They’re both promises, aren’t they, that will, that could, cost billions of dollars?
ANDREW ROBB:
Well again, it depends on how you approach these things. By the way, we’ll be looking at sensible water catchment all around the country, with a particular focus on the north, I agree, there are enormous opportunities up there. But we have been looking around the country and there are many things we can do to increase the production capability of agriculture in a century which will be the century of food security and the century of Asia.
So strategically, it makes enormous sense for us to set up Australia for this century, in terms of rural production, but secondly, in terms of how you do that, I mean, this government only thinks about government spending and yet, there are billions of dollars locked up in companies’ balance sheets, invested in bonds or whatever, because they haven’t got the confidence to make investments. They’re sitting on money. Now, we’ve got to look at ways where we can unlock that money, including in the public infrastructure.
LYNDAL CURTIS:
And on the question of spending NBN savings on easing traffic congestions, that’s a saving you then couldn’t book as a saving if you accept, which the Government doesn’t, that the NBN is effectively on the books. Is that promise, spending some of the money that you were counting on to save?
ANDREW ROBB:
No, it is again, the NBN is borrowing money, $50 billion they’re going to borrow in the end, $37 billion we know for sure but it looks like another $50 billion. That’s got to come from somewhere. That’s money that could have been invested somewhere else, in a more productive outcome and whether it’s government money or private money, it is money that could be spent on things that would have far greater productivity improvement and we could be having an NBN at much lower cost.
We could get the best of both worlds but the bottom line is that that money, it’s a combination of private and public. It’s money that is being very inefficiently invested. That money could be going to other purposes and government policy can help that happen but not necessarily always with government putting taxpayers’ money into the mix.