SENATOR THE HON PENNY WONG

MINISTER FOR FINANCE AND DEREGULATION

TRANSCRIPT

8 April 2013

SUNDAY AGENDA WITH PETER VAN ONSELEN AND PAUL KELLY

TOPICS: BUDGET, ECONOMY, SUPERANNUATION

E&OE - PROOF ONLY

VAN ONSELEN: We are joined now by the Finance Minister, Senator Penny Wong. Senator, thanks for your company.

WONG: Good to be with you.

VAN ONSELEN: Can I ask you about superannuation? It’s obviously the big domestic issue of the week. My understanding is that you wanted to go much further but, internally, Bill Shorten and others got their way. How do you respond to that?

WONG: Well, I don’t discuss what might or might not have happened in discussions about this. But in terms of superannuation, I think it’s important to see this package from first principles. What is superannuation about? It’s about making sure we have secure, adequate retirement incomes for all Australians. That’s why Labor established it, over the opposition of the Coalition. What does this package do? Well, it says, look, we’re going to build on the existing measures that we’ve put in place: the tax break for 3.6 million low income earners; the tax increase on the contributions of people earning in excess of 300,000 dollars; and we’re going to have a system that’s even more sustainable and more fair for the long term.

VAN ONSELEN: But it’s not a system, is it? It hasn’t gone as far as yourself and others within the Labor party wanted it to go. You wanted bigger changes than you’ve got. The super industry are happy because that hasn’t happened.

WONG: I think it is a balanced package that does what we wanted it to do, which is to look to the long term to ensure that we made the system of concessions more sustainable, and we continued to build the retirement incomes of Australians – particularly low income Australians. I think it’s important to remember, when we have this discussion about concessions, there’s a bit of discussion in the media that makes it appear that concessions are no cost. What are concessions? They are tax revenue foregone. And you should have concessions in respect to superannuation because you have a long term policy objective, secure retirement incomes, adequate retirement incomes, that you have to put in place. But you also have to make sure that your concessions are sustainable. And that’s what this package does.

KELLY: Is this the end of it?

WONG: This is the package the Government has announced. It is a very –

KELLY: No, but, is this the end of it in terms of further changes to super?

WONG: And what I was going to come to was: and we are very conscious of, I think the very reasonable proposition, that the perception of governments – and let’s remember the tinkering of super certainly started with Peter Costello – the perception that governments will tinker with super through various budget cycles is a real one, which is why the Government’s put in place a structure and a process to make sure the changes have far more consultation than we saw in previous governments and are judged by an independent body. So you will recall that Minister Shorten has announced that the Council of Superannuation Custodians which will, if the Government is re-elected, be able to consider policy proposals and go through a proper, transparent process. And I think what that does is it gives people some comfort that governments aren’t going to be able to tinker, and I think will install more confidence in the system.

KELLY: But at the end of the day, governments proceed to make further changes. I mean, having this group of custodians won’t prevent that, obviously. 

WONG: Oh look, but I think you and I both know, once you put an independent body into the process of policy consideration, that does change how governments approach policy areas. And, you know, we do take the approach you have to take a long term perspective. I think this is a very good proposal from Bill.

KELLY: But, I mean, obviously from what you’re saying is that we can expect further changes to super if Labor gets back.

WONG: No well Labor’s policy is the one that we’ve announced – what we’ve done, and what we’ve announced. So we –

KELLY: But you’ve talked about further changes – you just talked about further changes

WONG: No, what I’m saying is, that we are very cognisant. What we’ve announced is our policy.

KELLY: Sure.

WONG: So I’m not saying there’s any change to Labor policy

KELLY: But it’s your policy for the election.

WONG: It is Labor Government policy. And we clearly intend to legislate it, as the Treasurer said. And obviously we don’t have a lot of sitting weeks between now and the election. We’ve got a pretty full legislative timetable. But this is Labor Government policy and it’s very good policy.

KELLY: But when you say you intend to legislate it, you mean this term before the election?

WONG: Well, as the Treasurer has said, we’ve got a pretty full legislative program. But I think – I saw some aspects of Senator Milne’s interview, and she’s really saying the same thing, unusually, or not necessarily unusually, that Tony Abbott is saying and trying to make some hay out of this. I have to say I don’t quite understand the political point.

KELLY: I mean surely we can sort out this point –

WONG: No but I don’t quite understand the political point, Paul. I mean this is Labor Government policy –

KELLY: No, no, no, it’s a very simple point, Minister. Can the Government tell us whether this will be introduced as legislation this term?

WONG: We certainly will have some aspects of previously announced policy needs to come –

KELLY: No I’m not talking about previously announced policy, I’m talking about –

WONG: Well let me get to the answer –

KELLY: I’m talking about this policy –

WONG: No, Paul, let me get there. And we will proceed to work on this legislation. I think it’s fair to say, in the press conference the Treasurer made clear that whilst we do intend to legislate this and this is Labor Government policy, the realities are, in terms of the number of sitting weeks and the Budget sittings, we have a pretty tight legislative program.

KELLY: So it probably won’t be legislated.

WONG: Well, you know, I think we do have a pretty tight legislative program. But, as I said, I don’t think that changes the position. People will know, at the election, they either get a tax increase, for 3.6 million lower income earners if they vote for Tony Abbott, or they get a better, more sustainable system, with the Labor party.

KELLY: But just back on that first point that Peter raised. I mean the Government has put up there in lights these Treasury numbers – that the tax concessions are worth about 32 million annually. I mean, this measure raises about an extra 900 million –

WONG: Over the forwards.

KELLY: Across the forward estimates. I mean, there’s an awful big gap here. Surely this indicates that if Labor gets back it will want to tackle this and make more savings?

WONG: I think the better way to look at it is the long term outcome. And –

KELLY: But you agree with the principle I’ve just –

WONG: No, no –

KELLY: – enunciated, surely.

WONG: No, I don’t. What I’m unpacking is your premises. That the longer term outcome, if you look at what we’ve done with higher income earners – so the previous budget measure where people earning over 300 thousand will pay a slightly higher concessional rate of tax than they currently pay, plus this measure out to 2020 over the next ten years – that’s a significant re-balancing of the system and I think a sensible one. Always in this area – and I know that the Greens want to tax more – but you do have to look at what is the right balance. What is the right balance of concessions, what is the right balance in terms of fairness to low income Australians?

KELLY: Well have you got the balance right now?

WONG: Yeah I think we have.

VAN ONSELEN: Do you really think that –

WONG: Yes I do.

VAN ONSELEN: Because the rhetoric ahead of the announcement that was made about super was that there was this pot of 30 billion dollars or thereabouts that is there in concessions, which is not right. And we’ve got such a small fiscal outcome. You’re the Finance Minister, you’re the person who’s got to try to make the numbers add up. The outcome that we’ve got in super is very different, in its substance, to the sort of rhetoric about the size of the change that was going to be put.

WONG: I think you are confusing the rhetoric of some of the commentators and some of the people engaged in the fear campaign to what the Government was doing.

VAN ONSELEN: So there was never an intention that went further than this?

WONG: Well what I’m saying is there was a big scare campaign run. The Treasurer said, very clearly, and quite early on, that the driver of the superannuation reforms was not the short term budget position, and nor should it be. The driver of superannuation reforms was always the longer term position. Now, as Finance Minister I actually talk about the long term all the time. Because I think you have to judge policy by its long term impact. You have to look at how do you fund this now, how do you fund it in the long term? What will the demographic changes mean for the structural expenditure over the long term? Superannuation, even more so, you should be looking at it from a long term lens, and that’s what the Government has done.

VAN ONSELEN: But the Government, as part of that long term lens, the Government must have been wanting to respond to Treasury’s claims that there was just too much by way of concessions. Yet the policy announcement hasn’t made that big a fiscal impact.

WONG: Well, as I said, I don’t think superannuation reforms should ever be driven by short term budgetary considerations. They should be driven by, one, how do we best ensure a secure, adequate retirement income for all Australians. And what have we done? We’re increasing superannuation guarantee from 9 to 12 per cent. We’re reducing the tax paid by 3.6 million Australians. Tony Abbott wants to change that. And we’re rebalancing the concessions. Now these are all –

VAN ONSELEN: Did you want to do more?

WONG: I don’t go into that. I mean I’m not – certainly never, ever going to be one of the people who might discuss what was said in Cabinet.

KELLY: Can we just clarify this point? Are you ruling out further changes in the next term of government?

WONG: Well I can tell you what our policy is, and our policy is the one announced. And, in terms of the fear campaign –

KELLY: So you’re not ruling out –

WONG: Well now hang on. Come on Paul. I know that Tony Abbott wants this fear campaign up so he can distract attention from the fact that he wants to impose a higher tax – he wants to impose higher taxes on 3.6 million Australians. Unlike the Opposition, we have put our policy out. And, unlike the Opposition, we have said we recognise that people are concerned about the prospect of future governments tinkering with super. So we will put in place a system which imposes a discipline on any government to ensure any changes have proper consultation and a genuine lead time. So that is, I think, a very different position to the one that Tony Abbott is putting forward. So our plans are the ones we’ve announced.

VAN ONSELEN: Tony Abbott, when he talks to different states, tells them different things in relation to the GST. When he spoke to Colin Barnett he told him he empathises with his need to adjust the GST, but when he and his ministers talk to Tasmanians or South Australians, they say something quite different. Is the Government going to look to focus on this, because it’s a key issue in some of these states where the Liberals are trying to pick up seats.

WONG: Well absolutely. And we will try to focus on it because it goes to Tony Abbott’s honesty and it goes to his credibility. And you are absolutely right to say that when he’s in Perth he says one thing, and when Eric Abetz is in Tasmania, or Christopher Pyne is in Adelaide, they say something different. So what are the facts? Facts are: Tony Abbott has said that he thinks the per capita arrangement makes a lot of sense. The facts are that Colin Barnett has said that Tony and he have had a conversation where Tony made it very clear that he didn’t think the weak parts of the economy should be holding back the strong parts. Now, everybody knows what that means. And the facts are that Tony Abbott has never explained what happened in that conversation. So I think it’s up to Tony to explain what he said to Colin Barnett. Because it’s quite clear, it’s quite clear, that the promises – so called promises – that others are making in South Australia and Tasmania, that this isn’t what they’re going to do, don’t add up when you look at the comments from Barnett and Abbott.

KELLY: Minister, isn’t it the truth that the current system of GST distribution is highly inefficient and rewards incompetence?

WONG: I don’t agree with that. And I think if you look at the review that was undertaken by a range of ex-premiers and others, that is, that has been released, and that we have indicated is currently with heads of Treasury – it says a few things. It says that there are some I suppose tweaks – but fundamentally it says the current system works well.

KELLY: So you won’t be –

WONG: So I am a supporter of HFE because I think the principle that Australians, wherever they are, should have access to a similar standard of service provision and infrastructure is a sound one. I think that is a sound one. 

VAN ONSELEN: It’s going to be an embarrassing Budget for the Government isn’t it? Because a number of ministers, yourself included, have pledged that it was going to be a surplus, and it looks like it is going to be a deficit as high as 20 billion dollars. Now whatever the reasons behind that, the strength of the rhetoric, ministers til they were blue in the face insisting it was going to be a surplus, followed by such a significant deficit, is embarrassing.

WONG: Well, there’s a lot of things in political life which might be hard. But ultimately the thing you have to do if you’re in these jobs is do what’s right for the country and for the economy. And it is very clear that what we are seeing in the economy means that we have a very large hit on revenues. And Paul’s probably one of the few commentators who understand what the effect of a nominal GDP being below real GDP is. And we’ve had that for three successive quarters through the year. That hasn’t happened in 50 years, since the national accounts commenced. What does that mean?  It means that profits are hit and prices – and Government revenue is hit. And that is a hit that is substantial both in this year and, as the Treasurer said, over the forwards.

KELLY: Will the Budget, when we see it, offer a pathway back to surplus?

WONG: The Budget will certainly comply with the Government’s medium term strategy, which has the objective of surpluses over the economic cycle.

VAN ONSELEN: So we will see a surplus in the forward estimates?

WONG: Well, we will put all our forecasts on the table on Budget day, unlike the Coalition.

KELLY: I think this is a reasonable question though.

WONG: It is a reasonable question, but –

KELLY: Because I mean the Budget provides forward estimates across the coming years. So can I ask again: given the Government promised to get back to surplus this year, will the Budget offer a pathway back to surplus?

WONG: And what I’d say to you is first, in terms of our record, we’ve offset all new policy decisions since 2009. We’ve dealt with a massive revenue write-down. We’ve taken a very large amount of savings. We’re now grappling with the nominal GDP issue, which is obviously affecting not only company profits but government revenues, and we will ensure that our forecasts across the forward estimates are there and transparent to all.

KELLY: But this is a credibility issue for the Government, isn’t it. Because, I mean, essentially for years the Government was saying it’s important for the economy for us to have a surplus. It’s important to get low interest rates. It’s important –

WONG: And we have.

KELLY: It’s important for economic activity.

WONG: And we have Paul.

KELLY: And, of course, now the Government is saying well it’s important to stay in deficit because this is the responsible position.

WONG: No, the Government has always said you make the right economic calls for the time. And I actually think, if you look at the calls we have made, and you look at what they’ve resulted in, the Government has made the right economic calls. Let’s have a look. Over 920 thousand jobs created since we came to government. The economy 13 per cent larger at a time most other advanced economies are still struggling to get back to where they were prior to the GFC. Unemployment at 5.4. Low interest rates and contained inflation. Now, are you saying to me that we haven’t made the right economic calls?

KELLY: Do you accept responsibility for misleading revenue estimates? I mean, the revenue estimates have been far too optimistic. They are treasury numbers, they are Government numbers. At the end of the day, that’s your responsibility, isn’t it?

WONG: I think the term “misleading” implies intention, and –

KELLY: I’m not saying –

WONG: Yeah and I’m not –

KELLY: I’m not suggesting intention, ok. I’m suggesting competence here. These estimates are wildly astray. And at the end of the day, you’ve got to accept responsibility for that, surely.

WONG: And I think you’ll recall, and you might even have been one of the people writing about it, that the estimates during the Costello years were also wildly astray. And, in fact, massively –

KELLY: The other way.

WONG: The other way, and massively more revenue which was splurged.

KELLY: So it’s better to be in their position than in your position.

WONG: No, no, I think they were luckier. The reality it, Treasury makes the best estimates it can. We’re very conscious that it’s important to make sure – well, Treasury’s very conscious how important it is to have the best estimates possible. And you might recall Doctor Parkinson commissioned a review of forecasting, which has been, the Treasurer has spoken about. And what I’d say to you is we do face an unusual set of circumstances. First time in 30 years we’ve seen nominal GDP below real GDP for 3 successive through-the-year quarters. It’s a pretty unusual set of circumstances, and it’s not a political point. Whoever wins government in September is going to have to deal with this, and no amount of political blustering can get away from that.

VAN ONSELEN: Minister, we’re almost out of time. But –

WONG: We should talk about Cyprus.

VAN ONSELEN: Well, on that, because the Prime Minister has come out and said that Tony Abbott is a person who is an economic simpleton. Is that really appropriate? I mean, he’s got a B.A. – he’s got a Bachelor of Economics. He’s got a Masters from Oxford that includes economics. He understands it, even if his rhetoric is a problem.

WONG: Well, whatever qualifications he has, he behaves as a one-man-wrecking-ball. And this is a man who wants to be the Prime Minister of the country, making economically reckless statements. I mean, can you imagine, for all of my criticisms of Howard and Costello, can you imagine John Howard ever using – trying to damage confidence in the economy and in superannuation to make a political point? I can’t.

VAN ONSELEN: Probably not, would be answer.

WONG: Precisely.

VAN ONSELEN: And I’d love to ask Tony Abbott about it, but we haven’t had him on the show in 482 days and counting, so we’ll have to wait.

WONG: There you go.

VAN ONSELEN: But we’re out of time in this interview. Finance Minister Penny Wong, we really appreciate you joining us in the studio, thanks much.

WONG: Good to be with you.

ENDS