20 April 2013




KENNY: Joining us now from Adelaide is the Finance Minister and former Climate Change Minister, Penny Wong. Thanks for joining us, Minister.

WONG: Good to be with you, Chris.

KENNY: I want to start with this dramatic crash in the European carbon price during the week. We have seen that price fluctuate over the years but it had settled down around $9 or $10 – it’s now dropped to below $4. Now, why should Australian manufacturers, Australian industry, Australian business, be paying five to six times as much as a carbon price compared to their European and global competitors.

WONG: Well, let’s start with that proposition. Let’s recall, first, that the Government has in place in our climate package – our Clean Energy Package – substantial assistance to industry which is affected by the carbon price. And so, for the heaviest polluters, their carbon price exposure is substantially less than what you’ve quoted. In fact, it’s about $1.30 a tonne when you take into account the level of free permit assistance which is available. So, I think the proposition that everybody is just facing that scale of carbon price with no assistance is not the right comparator to make when you look at other economies.

In terms of the European carbon price, as you said in your introduction, that has moved around a fair bit, and, like other prices in the economy as a result of the global financial crisis and the washout, you’ve seen very significant movements in a whole range of different economic parameters or different economic data, and the carbon price is no different in Europe.

KENNY: Well, who set the carbon price or the carbon tax price in Australia? Because, as soon as it was announced at $23 a tonne, a lot of experts suggested that was too high. You’ve now based your forward estimates on it going up to $29 a tonne. Were these figures settled on by Treasury and Treasury alone or were there political considerations in this?

WONG: Well, we did, both when I was Climate Change Minister and then when Minister Combet took over, release, with the Treasurer, very extensive Treasury modelling which looked at the predicted carbon prices down the track, and obviously those informed the Government’s decisions on the climate package. In terms of the Budget – we’ve been upfront. We’ll have to consider the carbon price along with other factors when we’re putting together our Budget.

KENNY: If Treasury suggested the carbon price in 2015 was going to be $29, this is remarkably poor forecasting, isn’t it? They look like being out by a factor of five …

WONG: Look, we went through the most extensive modelling that Australia’s ever undertaken with the modelling both for the scheme that I had charge of, I had carriage of, and then of course the Clean Energy Future package, and the Government was informed by that modelling. I don’t know anybody who predicted the global financial crisis, and I don’t know anybody who has been able to anticipate absolutely accurately what its fallout would mean, and so obviously the carbon price has been affected amongst those.

I would make this point, Chris: some of the people who are saying we should have moved to a floating price already are amongst the same people who voted against the Government’s first carbon proposition which would have seen Australia already at a floating price, which of course was what Tony Abbott did after he took over as leader.

KENNY: Well, you talk about that floating price. That, of course, is allowing Australia’s carbon price to float internationally, which would see it drop down to around what the Europeans are paying now. It’s not just politicians saying that now – you’ve got industry leaders saying that should happen. But, of course, you can’t do that because you’ve locked the current Budget and future Budgets into an enormous amount of spending – the compensation you’ve referred to that relies on that high carbon price. What sort of a hole is this drop in the carbon price going to leave in your forward estimates?

WONG: I want to deal with what you suggested first about the fixed price. Can I make this point: the policy argument to change position, as you’ve asserted, is basically saying that you want the Government to say to business: ‘we’re now going to change the rules halfway through again’. I don’t think that’s an appropriate way to deal with a long-term reform, to say we’re going to change the rules part way through.

I think with carbon, with pricing carbon, you always have to look to the long term and understand you’re trying to change the metrics by which business do business. So, we want them to pollute less, and that’s what the carbon price is already achieving. On the Budget, as I said, we’ll obviously review this forecast along with all our other forecasts.

KENNY: Alright, well you mentioned the Budget. Of course, up until Christmas we had very, very strong comments from yourself, the Treasurer, Wayne Swan, and the Prime Minister, Julia Gillard, saying that you would deliver a surplus, in fact claiming that the surplus had been delivered at times. You’ve stepped away from that – it’s going to be a deficit. But given that you were for so long and halfway into this financial year predicting a surplus, can we assume… can you tell us, it will at least be a narrow, a slim, deficit?

WONG: Oh, Chris, I think that’s asking me what’s in the Budget and what’s in the forward estimates.

KENNY: We don’t need to –

WONG: No –

KENNY: We don’t need a number… Surely after promising a surplus for so long you will not be delivering a deficit that goes into double figures, tens of billions of dollars?
WONG: We will deliver a responsible Budget that looks to the future. We will make responsible savings decisions and we will make spending decisions which are wise, such as the investment in schools. And can I say that puts us in a very different place to Tony Abbott who would cut to the bone, as we can see by the extraordinary revelations of his senior policy advisor telling someone involved in indigenous employment that an Abbott Government would ‘cut their throat’. I mean, if you ever want an example of the attitude of an incoming Coalition Government and what it would be like, how they would cut to the bone, just have a listen to what their own staff say.

KENNY: That’s a separate issue, but when you’re talking about the education funding…

WONG: Come on –

KENNY: Well, you’re talking about apparently the drunken ramblings of a staffer as reported in a media event. We might stick to what the politicians are saying …

WONG: But, come on, Chris. You were a Chief of Staff, and you and I have very different political views, but I cannot imagine you ever saying to someone: ‘we’re going to cut your throat’.

KENNY: No, no I wouldn’t say –

WONG: … and I think –

KENNY:… and I don’t condone anyone saying but I also –

WONG: Sure, but my point is that it portrays a mindset around cutting to the bone, around mindless negativity and fiscal austerity which isn’t good for the economy, which isn’t good for jobs and certainly isn’t good for education.

KENNY: Alright, I take that point but I think it’s stretching it a bit to use those comments of a staffer at some drunken event to talk about policy. But if we talk about what the actual politicians are saying … I mean, you have a point there, because you are promising, through these Gonski reforms, to deliver greater funding – billions of dollars in extra funding in education – but you’re saying, of course, that the Opposition will provide much less. The problem, of course, is that no state Premier, not even the Labor state Premiers would sign up to this yesterday.

WONG: Well, I don’t recall superannuation being won in a week. I don’t recall Medicare being won in a week. I don’t recall the floating of the dollar being won in a week. This is a big Labor reform and it’s the right reform for the country.

Chris, the reality is if you look at the statistics, both from a perspective of social policy and economic policy, we have to do something with our education system. We’ve got too many children who are three years behind their peers. We’ve got an education system which is internationally becoming less competitive.

Whether its for the social reasons – about making sure we have equality of opportunity in every child being able to fulfil their potential – or an economic imperative for the nation – making sure we are competitive in this the Asian Century – we have to increase the resourcing and reform our education system.

KENNY: Given that you don’t have an agreement yet – that Prime Minister Gillard has not been able to strike an agreement with the states – will you be including any of this extra funding in the Budget?

WONG: We’ve already announced one savings measure as a down payment for this reform. We’ve been very upfront –

KENNY: So, you might have the savings but not the spending?

WONG: It’s our policy. This is Labor policy. And we will continue to campaign for this to June 30 and I would say to Australians that this should be above politics. This is about our children and making sure every child in every corner of this vast continent has the same opportunity to be the best of who they can be. We are not delivering that now as a nation, and we should.

KENNY: Finance Minister, Penny Wong, just on the Budget, you are predicting that you’ll shrink the federal public service by a couple of thousand people over this financial year. The Opposition have promised to shrink it by 12,000 extra through natural attrition should they win Government. Do you believe that’s a reasonable aim? Would you be looking at matching that aim of shrinking the federal public sector by 12,000 people?

WONG: You’d have to ask the Opposition who are they going to cut and which services are they going to cut? I think the Coalition has indicated they’re going to cut Indigenous Affairs – well, who’s going to deliver indigenous employment programs and all those things which are so important to closing the gap?

I’d make this point: Mr Abbott and Mr Hockey, you know, they always run around talking about a 20,000 person increase to the public service. Do you know the only way they can come to that figure, Chris? If they count increases in the AFP, Defence and Defence Reserves.

So, what Mr Abbott is saying is I’m going to deliver a 12,000 cut by cutting the ADF – the Australian Defence Force – or cutting reservists. Because the figures he uses refers to the increase which is driven largely as a result of increases in those areas of public service.

KENNY: From those comments, then, can we take it that you will rule out any further cuts to the federal public service?

WONG: We’ve already put in place many efficiency savings, we’ve taken about $13 billion worth of savings through efficiencies. We’ve imposed an efficiency dividend that has meant some pretty tough savings for departments. I’m not ruling anything in or out before the Budget, but I would say that we have taken a very substantial amount of efficiency savings already in the public service.

This sort of ‘line’ that Joe Hockey uses, that you can fund everything from the public service, is just a mathematical impossibility. A mathematical impossibility.

KENNY: So, those are reassuring words for the federal public service unions?

WONG: I’m not sure that not ruling anything in or out is reassuring or not reassuring. I think people will have to wait until Budget night.

KENNY: Minister, just another issue before you go. You’ve been an outspoken advocate, of course, for the cause of gay marriage. We saw during the week, across the ditch in New Zealand, the conservative Government who are led by the conservative MP, John Key, deliver gay marriage. Does it embarrass you, disappoint you, that a progressive, a supposedly progressive Labor Government in Australia has failed to deliver on the same score?

WONG: The Bill failed in the Parliament because, in great part, no Liberal voted for it, remember Chris?

KENNY: But your Prime Minister’s is entitled to vote…

WONG: Yes, she is, and I was very proud, however, that she, first, granted a conscience vote to all Labor MP’s and, second, I was extremely proud to be part of the group of people in the Labor movement who successfully pressed for a change to our platform to support marriage equality.

My view on this issue is pretty clear: our time will come on this because it’s a very simple idea – equality – a very important idea, and one I think increasingly Australians recognise as a community we have nothing to fear from.

KENNY: Just finally, do you think that Julia Gillard made a mistake naming the election date so early?

WONG: I think the Prime Minister wanted to make clear that we didn’t want to go through a period where there was so much speculation about when would it be and what would it be. We had a very big agenda and it was very important to timetable the year.

KENNY: It feels very much like a very, very long election campaign though. Finance Minister, Penny Wong, thanks very much for joining us today.

WONG: Good to speak with you, Chris.