30-November-2011
Portfolio Media Releases
Topics: Mid Year Economic Fiscal Outlook, Industrial Relations
E&OE
ALI MOORE, PRESENSTER:
Now back to our top story: the federal budget deficit and the Government's determination to achieve a surplus by 2012-13. I was joined from our Melbourne studio a short time ago by the Opposition's finance spokesman Andrew Robb.
Andrew Robb, many thanks for talking to Lateline tonight.
ANDREW ROBB:
My pleasure, Ali.
ALI MOORE:
The Government has found that savings that it said will deliver surplus - a small surplus, but a surplus nonetheless. They're introducing bigger cuts to the public service as one way to get there. They're to be commended, aren't they, for trying to rein in public spending?
ANDREW ROBB:
They've got a blow-out of $26 billion in debt. We heard tonight Wayne Swan on the 7:30 Report for about 15 minutes, I don't think the word "debt" passed his lips. But I'm sure he'd say that, unfortunately, I think the dog ate the Government's home work yet again this year.
There seems to be excuses every year. I suppose our concern is that we feel they have left the economy in a far more vulnerable position than it need be and, you know, there is $87 billion of stimulus money, and much of that was not necessary - and in fact it has put us in really quite a precarious position if there is any sort of serious rundown in commodity prices.
ALI MOORE:
And yet the country's top 100 CEOs - those represented by the Business Council, those we imagine to be your natural allies - they say this is the right economic policy for the times, quote: "It will send a strong signal to households, business and investors that Australia can keep its house in order."
ANDREW ROBB:
That would be good if it were true. You see...
ALI MOORE:
So all those CEOs, the Business Council, they're all wrong?
ANDREW ROBB:
Well I don't think they have properly studied the detail in this budget. We have seen, again, a debt blowout by $26 billion in the last five months and it's not accounted for. We have seen some shameless financial or fiscal trickery. This is a hoax. The deficit is a hoax.
I mean they are billions of dollars really short of what is the reality in this budget, and they've done this year in, year out. They're now complaining that they're not getting as such revenue as they thought. You look back the last budget and the budget before. Every time we have said, and others, that the forecasts are Pollyanna-like, that they are the top end, the most optimistic forecasts, given that the world knew Europe was still to make a major adjustment.
The world knew that the US was going to stumble along for some time, and yet they have been assuming that the 140 year highs in terms of trade will continue.
ALI MOORE:
At the same time though, against that back drop of a very difficult international environment, for the first time now Australia has been given top marks by all three major ratings agencies for the first time ever. Do we take that with a grain of salt?
ANDREW ROBB:
No, we don't, no, we don't. But look, it's not a point of comparing us necessarily with a number of basket cases around the world - and that's really what's happening at the moment. I mean, Europe is on the cusp of certainly a major recession, if not a lot worse than that.
ALI MOORE:
Yes, but those ratings agencies are not just rating the "basket cases of the world". They are rating every major economy.
ANDREW ROBB:
We're talking about major economies. You know, we're talking about the European community which is a basket of major, you know, established seasoned economies, and some of those are looking to look like they will default, and others going down with them. I mean the whole Euro looks like, I think, it's likely to spin apart. I can't see how they will patch that up and pull themselves out of the problems they're in. It might take two or three years but it's coming.
So, you've got a situation where a number of major economies are basket cases, they've lived beyond their means. Now we're blessed with China, right. If you took away China our underlying structural deficit is actually worse than Italy's.
ALI MOORE:
But we've still got a AAA rating - all three ratings agencies first time ever in Australia's history.
ANDREW ROBB:
We have, but much of that, if, you know, the Business Council and others read the reasons for that, they would see that the ratings agency said firstly that they've given that to Australia compared with the other major economies because of structural features which have served Australia well over the last two decades. Not the last two years, the last two decades.
So, the reason they have re-rated us is because of the earlier strong financial management. And the second thing they did say - and they really qualified this - they said that our... that we are very suspect to any sort of decline in commodity prices, that will affect our public finances severely, and they said from a finance point of view that we have got a major risk. We're not really AAA rating quality in terms of that external financial exposure that we've got.
ALI MOORE:
Let's move on and look at the cuts to the public service. A one-off increase in the efficiency dividend. Penny Wong says the cuts will come through reductions in travel, consultants, advertising and hospitality. They're exactly the sort of areas that should be targeted, aren't they? And how much better in terms of cutting into the public service could the Coalition do?
ANDREW ROBB:
We had committed to maintaining public service numbers of real cut but not removing anyone... forcing any redundancies. We said we would not replace any people for two years...
ALI MOORE:
Joe Hockey said 12,000 public servants redundant in the first two years.
ANDREW ROBB:
That's the first two years, if you don't replace anybody. This is a much higher efficiency dividend than we were looking at, and yet they were criticising our efficiency dividend and said that it would and must imply public service cuts.
Well, of course now Penny Wong and Wayne Swan say that no, that's not necessary, even though two thirds or three quarters of the bills in all of these departments are in fact wages.
ALI MOORE:
But how does your policy of 12,000 public servants to be made redundant voluntarily - you're saying no forced redundancy in the first two years - yet you've also got a policy that says you will scrap the Department of Climate Change. I understand that includes something like 15,000 people?
ANDREW ROBB:
We're yet to detail all of this. We will show what our cuts will be. The 12,000 was from last time, we said we will repeat that. But in the main we will wait to see... we've still got possibly two budgets, and if you base it on this MYEFO. I mean, this MYEFO has blown out in the space of five months by $15 billion. The debt has gone up $26 billion.
ALI MOORE:
Can you confirm the decision to scrap the Department of Climate Change. Are you saying on top of your 12,000 you will now be adding more?
ANDREW ROBB:
We have said we will get rid of the Department of Climate Change, and those functions will be, in a modified version, part of the Department of Environment. So that is a decision we have announced. But how that would work, what numbers are involved... we're not going to make final decisions until we get through, as I say, possibly two budgets.
We think this is a house of cards. There are all sorts of trickery. They have brought not just infrastructure forward, which I don't think will be spent anyway because joint spending with the states, so Wayne Swan said, "Who would oppose any bringing forward of any infrastructure?" Well, the states who haven't got the money may well oppose it. The other thing is, on top of that there's about $5 billion or $6 billion of money either brought forward or delayed to create what I think will be a very artificial a surplus or something near a surplus.
ALI MOORE:
But even with what we know now about your policy, disregarding what might happen in the next two years, you've got a major challenge, haven't you, to find the spending cuts? You agree that you will keep the increase in compulsory super, but you will scrap the mining tax which the Government says will pay for it.
You agreed you will keep the compensation for a carbon tax, but you will scrap the carbon tax itself. Is the $70 billion you've said in the past you've got to find, is that $70 billion now looking like something substantially higher?
ANDREW ROBB:
We haven't said that our task is $70 billion. We don't know yet what the task is until we see...
ALI MOORE:
But that's your best guess, isn't it? I mean, at 16th of August you said "it's the estimate of the sort of challenge we will have". September 4th, "it's not a furphy, we came out with the figure."
ANDREW ROBB:
That was put forward as the order of magnitude. Start to strip that away. If you take off $31 billion of carbon tax and then you take off $9 or $11 billion, whatever it is, of mining tax, and you don't replace most of that spending, already you've cut that figure well over half. I mean, so, it is assumed, you know, a place in the debate which is meaningless in fact.
ALI MOORE:
But with respect, Andrew Robb, it's the place in the debate that you've actually given it. I mean I'm only giving you two examples. You've said it's your estimate of the sort of challenge that you face, $70 billion. How else are we meant to read that but as being your best guess at this point of the challenge you face?
ANDREW ROBB:
What I'm saying is. It is a meaningless debate, because firstly it takes no account of the fact that we are going to remove taxes worth tens of billions of dollars against which there is expenditure by this Government which we won't incur. So there is straight away... you've got a situation which is quite different.
Secondly, there's another two budgets to go before we go to an election. We've got the situation in Europe, we've got China likely to come back.
ALI MOORE:
You say you're removing some of those taxes and the expenditure that goes with it, but in fact isn't part of your issue that you're removing the taxes but not the expenditure that goes with it? You're keeping the compensation for the carbon tax, as I said, and indeed you're keeping the super changes?
ANDREW ROBB:
We don't need to forever keep the compensation for the carbon tax. Certainly the compensation to industry, why would we pay that if we've removed the carbon tax?
ALI MOORE:
And what about the personal tax cuts, why pay them if you remove the carbon tax?
ANDREW ROBB:
Well, we're going to make personal income tax cuts, that's something that we have consistently done through government. It's not just something related to a carbon tax. We're not committing to giving exactly the types of cuts that the Government is intending to give related to the carbon tax. We will announce a body of carbon, of... sorry, a body of personal tax cuts in due course before the election. So, what I'm saying: the discussion is meaningless, we know we've got a substantial task.
This Government, in our view, has spent and spent and taxed and taxed. It is why we've got the third fastest growth of public debt in the developed world. That's behind Iceland and Ireland. So, you know, we are catching up very rapidly, and if commodity prices came off for whatever reason, Europe, China or a combination of both, our structural deficit is such that we could be facing next year another $50 billion, $50 billion deficit year on year.
ALI MOORE:
Andrew Robb, we talked earlier about the support of the business community for the Government surplus. Big business is also increasingly unhappy with the state of industrial relations in this country. David Murray told Lateline last night he sees no programs to improve productivity in Australia. Business is constantly telling you that they're not happy, they want more flexibility in the workplace. Do you share the disappointment of business that the Opposition is not responding?
ANDREW ROBB:
It's not a question, we're not in government, Ali, we're not in government, right. We are becoming...
ALI MOORE:
But you are the alternative government, aren't you, and in theory with the Parliament we've got almost at any point with there could be an election.
ANDREW ROBB:
Almost, but with all likelihood with the tricks and the...
ALI MOORE:
But isn't it your job to engage in the debate, to provide an alternative policy?
ANDREW ROBB:
...lack of principle that's going on out there with the Speaker. It could go two years, so we've got to be ready for something now or ready for something in two years time.
ALI MOORE:
So what industrial relations - what are you ready for now?
ANDREW ROBB:
We have done a lot of work but we have said to... we have said to business - and they are responding - we've said, "You tell us what is going wrong with workplace relations, you tell us what's wrong with the Fair Work Act", and we are now being presented with endless examples where there are massive rigidities being reintroduced into the systems. Unions have now got a swagger back - the intimidation, in some cases the criminality.
ALI MOORE:
But, already policy has been made in one small area but I guess a very significant area: Tony Abbot ruling out statutory individual contracts.
ANDREW ROBB:
Well, our view is we can restore significant flexibility into the system, but we need to wait until we have had it clearly identified where are the hot spots in industrial relations that we must deal with - and I can assure you we will deal with them, and in advance of an election people will know what steps we're going to take.
ALI MOORE:
Do you support that decision though to rule out statutory individual contracts?
ANDREW ROBB:
Well, it's a policy decision of the party, so I support all the policy decisions of the party.
ALI MOORE:
Andrew Robb, many thanks for taking the time to talk to Lateline tonight.
ANDREW ROBB:
My pleasure, thanks, Ali.
ENDS