E&OE - PROOF ONLY
CASSIDY: Senator Penny Wong, welcome.
WONG: Good morning, good to be with you.
CASSIDY: So Joe Hockey saying same old rhetoric, same old softening up process.
WONG: Well you know I’m surprised Joe is sort of pointing the finger at anyone this week given the sort of week he has had.
But look this is going to be a tough Budget. It’s going to be a tough Budget because it needs to be a tough Budget in the short term given what’s happening to revenue because of the softness in the economy.
It also has to be a tough Budget because of the long term, the wave of investment we know that’s coming.
CASSIDY: Are you prepared to upset a few people along the way?
WONG: Well as I said it has to be a tough Budget. And one of the reasons for that is we know there has been a hit on revenue.
I think we’ve previously released figures that say the company tax revenue is down by about $3 billion. We can tell you also that we know personal income tax is going to be down about $1 billion since the November estimate.
So these are the facts. It’s going to be a tough Budget. It won’t necessarily be a popular Budget. But it will be a Budget that’s very focused on the short and long term needs of the economy.
CASSIDY: So I think you were saying there that the company taxes were down about $3 billion. That was the projection. But wasn’t that on November projections and those estimates didn’t take into account the Queensland floods so they may be worse than $3 billion?
WONG: That’s right. We know we’ve got some short term softness. And that’s as a result of a number of factors – the floods, the cyclone that you talked about but also a cautious consumer and the strong Aussie dollar which is obviously making some parts of the economy softer than others.
That means revenue will be down. We know company tax revenue will be down as you said $3 billion. And personal income tax for 10-11 is likely to be down $1 billion since the November figures.
CASSIDY: And that’s just PAYG?
WONG: That’s personal income tax across the board. So it includes capital gains which probably reflects what’s happened in the share market which hasn’t fully recovered since the GFC.
But can I just say that I mean that’s the short term outlook. We’ve got to also look to the long term – very big wave of investment. We know we have to make space for that. And we have to make difficult decisions now otherwise the decisions will just get more difficult down the track.
CASSIDY: So you say the PAYG but it may be more capital gains than that because a lot of people are in the workforce. The figures that came out this week had unemployment at just 4.9 per cent.
WONG: And look that’s an extraordinary figure isn’t it? I mean since we’ve been in Government over 755,000 jobs have been created in the Australian economy. It’s a great result. It’s an unemployment figure with a four in front of it which is quite extraordinary.
But it also reminds us why we have to look to the long term. And I can understand you know that people are saying there’s some softness, why do we have to come back to surplus, why do we have to make hard decisions.
And what I’d say is this: if we don’t make hard decisions today we’re likely to have to make more difficult decisions down the track.
CASSIDY: So every time you get news like this, and you were told fairly recently obviously that you’ve just lost another billion dollars, you just have to cut deeper.
WONG: Well it does make what was a tough Budget even more difficult. And certainly since I’ve been Finance Minister we’ve seen revenue right down.
We’ve seen greater costs as well. Obviously you know we had to put together a floods package to help rebuild Queensland and we had to make some difficult decisions around that.
CASSIDY: But why do you though every time you get these figures you just decide, okay we need to cut deeper when you’re just operating really on what is a political benchmark isn’t it?
WONG: I don’t agree with that Barrie. It really comes back to what I was saying earlier. You’ve got to look at the short term but you’ve also got to look at the long term. And the Government has got to be aware of what’s happening in the economy and what’s happening in the private sector.
CASSIDY: Sure, but what’s wrong with going into deficit?
WONG: We did that for the GFC.
CASSIDY: Or staying in deficit?
WONG: You know, what did we do when the Global Financial Crisis hit? We recognised the private sector was shrinking, it was retracting.
So what do we have to do as a Government? Go into deficit to put money into the economy to support jobs – right call.
What do we have to do now? We’ve got a big wave of investment coming. We know mining investment last year, $35 billion, this year $55 billion, next year estimated to be $75 billion. A very big wave of investment.
And we know as the private sector expands as we get that investment, we know that the private sector are going to employ more people, spend more money, use more resources.
You don’t want government chasing the same scarce resources. That’s why we have to come back to surplus.
CASSIDY: Okay so you’re not prepared to argue the circumstances have changed and therefore you can’t meet this promise.
Are you prepared to argue to the independents and the Greens the circumstances have changed and therefore you need to revisit some of the commitments that you gave them when you negotiated your way into office?
WONG: Well we gave those commitments to the independents and we will meet them.
But what I’m saying about the short term is that the short term difficulties have to be met and we have to keep the focus on the long term. Just as we did in the Global Financial Crisis we have to now as well.
CASSIDY: When you say you will meet those commitments is there any flexibility at all to renegotiate some of them?
WONG: We’ve made very public commitments to the independents. Some of them we’ve already delivered. They were delivered in the November MYEFO, the Mid-Year Economic and Fiscal Outlook.
And we will deliver further commitments to the independents in the Budget. That is our commitment to the crossbenchers.
CASSIDY: What are the further commitments in the Budget?
WONG: Oh well you’ll, you know they are all on the public record what’s in the agreements.
You will recall for example there is a Health and Hospitals Fund which was part of the agreement with Mr Windsor and Mr Oakeshott.
So we’ve got a range of commitments that the Prime Minister entered into and we intend to hold to those commitments.
CASSIDY: What about medical research? That’s a key area. And there is a suggestion that you might cut that by $400 million. That would be a massive cut.
WONG: Well I think this is a rule in, rule out question pre-Budget Barrie. And I’m not surprised you have asked it but I’m not going to get into that.
I am going to say this is a tough Budget and some difficult decisions will have to be made and are being made.
But I’d also say this: we’re a Labor Government. We’ll obviously bring those values of fairness and opportunity to the way we assess those decisions.
CASSIDY: The medical research thing though is a particularly hot topic with the Health and Medical Research Council says that you’re funding at this stage, you’re funding about a third of what they say is worthy of funding.
WONG: I think if you look back over the figures we’ve actually put a lot of money compared to the previous Government into this area.
But look I’m not going to get into rule in, rule out for the Budget. We are making our way through the budget process and we will make decisions in the national interest, looking to where we have to go.
And the Prime Minister has made clear not only do we have to make room for the private sector expansion. We also have to look to things such as skills and participation. It’s about the long term prosperity of the nation.
CASSIDY: Now on the carbon tax, is it still the Government’s plan not to release a price until after the Budget?
WONG: Well Greg Combet has made clear we’re going through a process of consultation. We’ve put out a broad framework for consultation.
He is working his way through with other Ministers consultation with the business community on the sorts of transitional assistance as well as other design issues and the price.
So obviously we want to go through that process and we want to go through it very well.
CASSIDY: And that can’t happen until after the Budget?
WONG: Oh you’d anticipate this will be finalised post-Budget. I think we’ve made that clear.
And there’s a lot of work to be done. A lot of good work is being done.
But you know let’s be clear. Putting a price on carbon is the right thing to do. We know we’ve got to act on climate change. We know we have to put a price on pollution to give the incentive to cleaner energy, cleaner ways of doing business.
CASSIDY: And when you announce a price on carbon will you also announce the compensation at the same time?
WONG: Well these are all matters that Greg is working through. But the principles are very clear.
This is not a tax that people pay. This is a tax that polluters pay, probably levied on around 1000 large polluters.
Now what we do with that revenue is to make sure we assist Australian households as well as industry through the transition, but particularly Australian households with a focus on those who need it most.
CASSIDY: Now last April you said that a carbon tax is not the silver bullet some people think it is. What did you mean by that?
WONG: I think you’re quoting from a speech or an op ed I wrote when I was Climate Change Minister.
And I was making the point that putting a price on carbon is a tough reform. And whether you do it through one or another mechanism doesn’t avoid some of the tough decisions that have to be made about that reform.
And you can see how tough a reform it is from the sort of opposition you get from Tony Abbott.
CASSIDY: Made tougher because it’s not a silver bullet.
WONG: Well made tougher because Tony Abbott decided to change his position to topple Malcolm Turnbull on the basis of action on climate change, ie opposing it, and is running a pretty tough scare campaign.
CASSIDY: As Julia Gillard did to Kevin Rudd and on and on it goes. Happens on both sides of politics.
WONG: I think the Labor Party position has been very clear. We believe action on climate change, we believe climate change is real. We believe we need to act on it. And we believe the best way, the most cost efficient, that is the cheapest way of doing it, is to put a price on carbon.
CASSIDY: Yeah the cheapest way perhaps but when you did talk about it not being a silver bullet you said that the alternative, the CPRS, you made these points – that a CPRS encourages private investment in pollution reduction, a CPRS caps Australia’s pollution. A tax doesn’t do either of those things.
WONG: Yes but I think you’re not recalling Barrie if I may say that what the Prime Minister has said and what Greg Combet has said is that this is an interim step to an emissions trading scheme, a cap and trade scheme which is what the CPRS was.
The reality is as an interim step, given this Parliament and given the negotiations we have to engage in to get a price through the Parliament we will need to have an interim step which operates like a tax on the big polluters.
CASSIDY: What is the rationale behind the interim step again?
WONG: Well as I said to you we know and the Prime Minister has said this, we know that in this Parliament this is the model that’s most likely to enable passage of legislation to put a price on carbon.
CASSIDY: So you do what you can do, what you can achieve in effect?
WONG: Well we have the Parliament that the Australian people voted for. And we also unlike Tony Abbott believe you need to put a price on carbon.
And what we’re doing is working our way through that Parliament, that consultation with a business community around things like the transitional support in order to ensure we get the right policy outcome.
I mean we can’t continue to have a situation where this country just says it’s too hard, we’re going to go down the Tony Abbott path.
I mean this is extraordinary, Mr Abbott’s position. I mean he has a position where on the one hand he says sometimes he believes in climate change, sometimes he doesn’t.
But fundamentally he has a policy which is about taking around $30 billion from Australian taxpayers and giving it to the polluters with no guarantee that we’re actually going to see a reduction in pollution. It doesn’t make sense.
CASSIDY: In Cabinet discussions just before Kevin Rudd decided to postpone the whole idea you were one of those ministers that were arguing to stay the course?
WONG: Well I don’t talk about what happened in Cabinet on any occasion Barrie. And I think…
CASSIDY: Why not?
WONG: Well because I just don’t. And I think you know that. But I…
CASSIDY: But why don’t you?
WONG: Because I don’t. And I think you’ve asked me questions before on that. But can I just say this…
CASSIDY: No but I don’t understand why you’re so reluctant to do it. Kevin Rudd does. He is honest and he’s open about these things.
WONG: Well Kevin was asked a question on Q&A which he responded to…
CASSIDY: And I’m asking you a question.
WONG: And I want to say this. Look I can understand why there is a lot of focus on that decision. It’s not surprising. I think I’ve said before it was a decision with implications.
But I’d say this: if you look five years down the track or 10 years down the track I don’t think history will be so focused on what happened on that decision.
I think history will be focused on the fact that Julia Gillard won a carbon price in the face of this aggressive Opposition and an aggressive scare campaign by Tony Abbott.
CASSIDY: But that’s a different issue. I’m just wondering why there’s not more consistency depending on who you ask.
You ask Kevin Rudd you get an honest and open answer. You ask other ministers and they say we can’t talk about these things. Why is there one rule for Kevin Rudd and not for the rest of you?
WONG: Well Kevin was asked a question on Q&A. And I’ve been on Q&A before and will be again…
CASSIDY: I’ve asked you a question on Insiders. What’s the difference?
WONG: And you know it’s obviously a format where there is a lot more discussion.
But what I would say to you is this: I think what’s important in terms of putting a price on carbon is the debate now.
And what Julia is doing is showing enormous mettle and enormous courage in the face of a very aggressive scare campaign.
I think we can win it. I believe we can win it. And I think what’s important is we focus on that task.
CASSIDY: You don’t think Kevin Rudd is making it tougher for the rest of you?
WONG: I think Kevin Rudd is out there working as a minister in the Gillard Government which is what he should be doing.
CASSIDY: Thanks for your time this morning.
WONG: Good to be with you.