FELDHOFF: Penny Wong, Minister for Finance and Deregulation, joins me now. Thank you for your time Minister.
WONG: Good to be with you again.
FELDHOFF: Minister, with a deficit like that, the Federal Government very keen on continuing to say were having a surplus. Does that surplus now look a little bit more on shaky ground?
WONG: We remain determined to bringing the budget back to surplus because I think as were looking at the global economy, you can see the importance of a clear and credible fiscal strategy. Thats one of the things that I think the volatility were seeing on global markets tells us. Theres no doubt that we have seen a very substantial hit on government revenues. If you look at where we were pre the global financial crisis and where we are now, youre looking at about $130 billion less revenue to government over a number of years as a consequence of what occurred in the global economy and therefore the Australian economy.
Now what we saw today was a Final Budget Outcome for the 2010-11 year, where we still saw less revenue than had been predicted previously. But we remain as I said, committed to doing the work to bringing the budget back to surplus.
FELDHOFF: Does that mean though realistically that were going to have to be a little bit more flexible on those sides of things though? Because this is, as you have just admitted, a very different financial situation world wide than was expected when those promises of a surplus were made?
WONG: If we just take a step back Sonya, and have a look at whats happening globally. Were seeing a lot of volatility in markets. And markets are reacting to many things. But one of the things particularly in relation to Europe that markets are reacting to, is the absence of what is perceived to be credible fiscal strategies. So I think theres a very clear reason from that perspective why the Government would ensure we adhere to the fiscal strategy we laid out. A strategy we laid out when we went into deficit to stimulate the economy. We also said we need a very clear plan, with very clear rules to come out of deficit and move into surplus. Thats the plan were currently applying.
FELDHOFF: Obviously when you look at these things, if you are still aiming for that surplus, there are other things that need to be reviewed. Theres been much debate about things like the sell-off of Medibank Private, perhaps revisions on spending. Are they the sort of areas that now have to be looked at again?
WONG: Medibank Private will remain in Government hands, thats the position of the Government. And Id just make the point they continue to provide Government with a dividend stream ie. income to Government. In fact, one of the mistakes the Coalition made was that they forget to factor that in and that contributed to their very substantial $11 billion black hole in their election costings.
FELDHOFF: So you can absolutely say that Medibank Private wont be sold off?
WONG: Ive said that a number of times Sonya, that is the Governments position. We will retain it in public hands. You asked about spending more broadly, and youre right. You always have to look for new savings options. You always have to look at new savings measures, you always have to re-prioritise your spending to the most high priority. That is an ongoing task. Thats what weve done in the previous budget. Thats what we did to fund the rebuild of Queensland and Victoria as a result of the natural disasters. And well continue to do that.
FELDHOFF: Its been pointed out by the Treasurer today that theres a really big job ahead to save ahead of this. That revenue income is obviously reduced and expected to be reduced over the next few years. Those savings targets, does that mean that people who are already feeling the pinch can expect that the belts going to get even tighter?
WONG: We will continue to look for sensible savings options as we go forward as we always do. But if the question is around costs of living, what Id say is this. Were a Government thats increased the pension. Were a Governments thats put money into health and more money into education. Were extending the family tax benefit for older children, for teenagers. And as part of our Clean Energy Package, were giving people a tax cut for those who earn under $80,000. Were going to be tripling the tax free threshold. It is true you have got to re-prioritise expenditure, but you also can bring Labor values to that task and thats what the Government has done.
FELDHOFF: Kim has just sent through a text, Minister, saying BHP Billiton made $22 billion and Rio made billions and the banks made billions and I pay tax and GST. Something is badly out of whack.
WONG: Which is one of the reasons why we will implement the minerals tax, something that remains opposed by the Opposition. Mr Abbotts in this bizarre position where he actually thinks miners should pay less tax, and small business and manufacturers should pay more tax. And that just makes no economic sense.
FELDHOFF: Just for a basic Economics 101 lesson, why is it so imperative that we push towards a surplus right now, and as quickly as possible, when people are struggling so much? Can we not just give ourselves a bit of time on this one?
WONG: I think when it comes to the economy, as in life, things dont get easier just by putting them off. It is important that we live within our means, and it is important that we make sure we run strong public finances, that we have a sustainable budget. Not just for the near term but we also have to have an eye to the future and how we continue to fund health and education and other social services in the years ahead.
But I think theres another message, and its the one I was speaking about earlier. There is a lot of volatility in global markets at the moment. That weighs on confidence. One of the things Governments can do to ensure we instil confidence is to provide clarity and certainty, and thats what you need to do when it comes to your fiscal strategy, which is about the fiscal rules that Ive talked about to ensure we come back to surplus, that we keep a lid on our growth in spending, and as the revenues recover we allow them to flow through to the bottom line.
FELDHOFF: Im speaking with the Minister for Finance and Deregulation, Penny Wong. Minister, obviously Australia isnt quarantined from whats happening in the rest of the world, in fact we do get impacted by that. So with that very big decision in Germany yesterday to put more money into supporting that eurozone and the euro generally, how will that change the situation for us here in Australia, if at all?
WONG: Thats a very good question, and I suppose you have to start by recognising one fundamental thing, and that is we live in a global economy, and we cant insulate ourselves from elastics of the global economy, in fact Australias done best when were prepared to compete in the global economy. Unfortunately we see a fair bit of volatility, a fair degree of concern on world markets, and one of the primary areas of concern is the one you identified, which is Europe. So obviously, events on the global markets do affect Australia.
But Id make this point, we do face this sort of change, this sort of turbulence from a position of relative strength. We have some of the strongest public finances in the world, our debt is very much lower, far lower than most advanced economies, about one tenth of the average of the major advanced economies. And we have relatively low unemployment, and we have a very, very big pipeline of investment coming into this country. So we have a lot of underlying economic strength, and its with that that we face the changes that are occurring in the global economy.
FELDHOFF: So with that backdrop, the Oppositions comments today that these are the two worst consecutive budget deficits in the nations history, how would you respond to those comments?
WONG: First of all, I dont know that Australians should be lectured about economic credibility by a shadow finance minister who has never got his numbers right, not once in this job. Joe Hockey, Andrew Robb, under Tony Abbott, had an $11 billion black hole at the election not found by me, this is Treasury and Finance, the same people who would advise them were they in Government said theres an $11 billion black hole in your budget costings. Mr Robb himself has said he needs to find $70 billion worth of savings to break even. So youre talking about an economic team that cant get its own numbers right.
FELDHOFF: But if we just look at the figures, are these the worst consecutive budget deficits in Australias history?
WONG: We went into deficit to put money into the economy, absolutely. And we did the right thing. The fact of that, the evidence of that is demonstrated by where our economy is relative to so many other similar economies. But for what the Government did, and what Australian business did, we would have had 200,000 Australians on the dole queues who are currently in jobs. We have more people employed now than we did this time last year, and we did not go into recession, unlike so many other countries. So yes, we went into deficit for the purpose of saving jobs, and now what we are doing is ensuring we come back to surplus.
FELDHOFF: Minister, thanks for your time today.
WONG: Good to speak with you Sonya.
ENDS