SENATOR THE HON PENNY WONG

MINISTER FOR FINANCE AND DEREGULATION

TRANSCRIPT

4 September 2012

SKY AM AGENDA WITH KIERAN GILBERT

TOPICS: ECONOMY, GONSKI REVIEW, INVESTMENT PIPELINE

E&OE - PROOF ONLY

GILBERT: Minister, thanks for your time. Tens of billions of dollars in announcements over the last few weeks in social policy – disability, dental care, now the Prime Minister is flagging billions more in education. As Finance Minister, you’ve got to pay for it. You must be nervous?

WONG: As Finance Minister I know what we’ve got to do is make some difficult decisions to fund our priorities. And we’ve done that today. Remember, all the things that the Government has funded to date, in government – things like Paid Parental Leave, things like the pay equity scheme, reforms to the pension – these have been funded through changing the priorities of government expenditure. Of course, this won’t be easy. But I think particularly the announcement yesterday is a really important economic investment for the nation. I don’t think we can be competitive in this, the Asian century, with the schooling standards, as the Prime Minister outlined, slipping down the international tables.

GILBERT: Are you looking at different priorities like means testing the Baby Bonus, for example, and the Child Care Rebate. Is that the sort of thing you’re going to look at? Because the Prime Minister did flag that middle class welfare was in the line of fire yesterday in that speech.

WONG: What she said was ‘look at our record’. We have been prepared to take difficult decisions – opposed by Joe Hockey and by Tony Abbott – things like the Private Health Insurance Rebate, changing some of the means testing for Family Tax Benefits. These were decisions bitterly opposed, initially, by the Opposition. And some people said we would never get them through, but we have. And they were decisions that have enabled us to fund some of the other priorities which are so important for the country.

GILBERT: So that is… is that indicating that it’s possible? The likes of the Baby Bonus, the Child Care Rebate, you’ll look at those?

WONG: I’m not doing this rule-in, rule-out on Sky Agenda I’m afraid, Kieran. We’ll go through the process of considering both the immediate-term and the longer-term funding demands of these reforms – and they are significant.

But they are also reforms that I think the nation needs. I don’t think anybody in Australia would say that we don’t need a National Disability Insurance Scheme, except perhaps some of the Opposition. And I don’t think anyone would suggest that this country can be competitive and fulfil all of our potential if we don’t lift the educational standards of Australian children.

GILBERT: With the education reforms, there will be a transition over six years to 2020. How much of this spending will be on the books across the forward estimates?

WONG: Obviously the Prime Minister has got to go through a process of having a negotiation with the states. And that negotiation will be clear about how that funding commitment will crystallise and we will deal with that when it does. But this is also a long-term commitment. We understand that and we need to look to the long-term as well. And we will.

GILBERT: Will you give an indication in the mid-year budget review of where the extra money will come from. It’s important, isn’t it, as a sign of good faith to the states, to other stakeholders, that you actually have got the money… the money to put where your mouth is?

WONG: I certainly wouldn’t want to pre-empt the negotiations that the Prime Minister is going to be having with our state counterparts. And I hope that they’ll be a little less oppositionist and negative than Joe Hockey just was on your program. I have to say, I thought I was listening to Christopher Pyne, it was so shrill and carping and negative. It’s surprising that Joe seems to have gone down that path. And we hope that the state Coalition leaders might not be so negative about something as important as our children’s education.

GILBERT: What about the dental care policy of last week? Will that require more money? There seemed to be some confusion around it as to whether or not you’d do that from savings, or whether or not it would require additional funding.

WONG: We always have to offset new spending. The point about the dental policy that was announced is that it does mean the Government can crystallise the savings that we’ve been committed to for some time, and that is the closure of the Chronic Disease Dental Scheme. We went to the election in 2007 with that commitment to close that scheme because it is a wasteful scheme, for the reasons Minister Pilbersek outlined.

So we’re pleased that, despite the Opposition’s vehement negativity about closing a scheme that is spending too much money, we’ll be able to at least obtain the votes of some of the significant number on the crossbench in the Senate – that is, the Greens. Because I think it is important to close that scheme. In terms of any new expenditure over and above the closure of that scheme, we will have to offset that.

GILBERT: Let’s look at another matter now – the Schoolkids Bonus and the carbon tax compensation appear to have masked a bit of a weakness in the economy. The retail sales report for July showed the worst trading for department stores since the global financial crisis as the stimulus wore off. How much of a concern is that to you and the Government?

WONG: Kieran, I’ve just got back from a trip overseas where I was in Washington, dealing with senior members… senior people there dealing with budget issues in the United States. I also met with the International Monetary Fund. And then I went to the Finance Ministers’ meeting in Moscow of the APEC economies.

And I’ll tell you what, in all of those meetings people were expressing their regard for Australia’s economy, their admiration for how this country had got through the global financial crisis. I mean the United States is dealing with net debt levels of 80-plus per cent of GDP. Our net debt peaks at just over 9 per cent of GDP. So I think we should all just step back and say, leaving aside Joe Hockey and Tony Abbott’s intent to talk down the Australian economy, we are doing very well by comparison with the rest of the world. There is no advanced economy you would rather be in than here in Australia.

GILBERT: Well, from your meetings at the IMF, at the APEC Finance Ministers’ meeting in Moscow as well, what’s your sense of the outlook? Is Europe, for example, past the worst of it, as far as you can tell?

WONG: There is certainly a lot of volatility and risk in the global economy. And, I think you’ll recall, when we handed down our Budget earlier this year we were quite pessimistic about the scale of the contraction in Europe. And there’s certainly a fair way to go. There have been some improvements I think in terms of the signs coming out of Europe. But I, for one, don’t think this is going to be solved overnight. I don’t think anybody does.

There’s a lot of work to do in Europe. Not just in announcements, but for the purposes of the markets believing that those announcements will actually come to fruition. The work plan of implementation of those reforms – whether it’s on the banking union front, on better banking regulation, whether it’s on the fiscal front – these are things the Europeans not only need to announce, but to work through step by step, and obviously all of us want them to do that.

GILBERT: We’ve only got about a minute left, but quickly, I want your thoughts on this analysis if you can, by the Financial Review on the Bureau of Resources and Energy Economics on major projects on the pipeline – suggesting a dozen projects worth about $100 billion are at risk of further delay. Is this the Government’s understanding, and is it a sign that the next phase of the mining boom is at risk?

WONG: I think we need to remember just how much investment is coming into this country. We’ve got half a trillion dollars of investment, over $260 billion of that at the advanced stage. And the figures in mining investment in the year to June are up by 72 per cent, so we’re off a very high base.

I’m not one that thinks that talking down this phase is a good thing to do. But obviously commodity prices have come off their peaks and we anticipated that in our Budget. But I think what we’ll see is we‘ll move to the next stage of this boom, which is investment and then high volumes of production. So there is still a lot of work we need to do as a nation to make sure those projects are actualised and can be delivered.

GILBERT: Finance Minister, Senator Penny Wong. As always I appreciate your time this morning on the program, thanks.

WONG: Good to be with you.

ENDS