2GB Money News Interview with Ross Greenwood - 24/09/2010

24 September 2010

ROSS GREENWOOD: Thank you for joining us Senator Wong.
PENNY WONG: Good to be with you.
GREENWOOD: Can I just say your new job quite clearly youve come into this and its an improved outlook, an improved situation, even in that very short space of time between the Budget in May and June 30 when the books were logged off.
WONG: Well obviously we welcome the fact that we have had an improvement since the Budget of about $2.3 billion to the bottom line. But there still is a very substantial task that lies ahead Ross. We have to hold the fiscal discipline that weve outlined. We have to ensure that we limit real growth in spending. So that is going to require discipline from this Government and from the Parliament.
GREENWOOD: The other point also is the net debt total $42.3 billion. But people have got to recognise that even in your own Budget figures that that is going to grow before it actually shrinks. Its not due to disappear according to your own numbers until about 2018
WONG: Look our net debt position is substantially better than most of the rest of the world. If you look, for example, at Germany or the United States, their net debt positions are very significantly greater than Australias. So it is the case that we have to improve the fiscal position. The way we do that is by ensuring that we keep a lid on spending, we limit real growth in expenditure and we hold that discipline as we go forward.
GREENWOOD: A lot of people when you came into the Finance portfolio said, Well hang on, where has she been? Where does it come from? and all that type of thing. I guess the truth is, you were, which a lot of people did not understand, the Shadow Minister for Public Administration and Accountability. That would have led you to have actually had to look at programs critically, and thats precisely what this job of Finance Minister is going to be for you now I guess.
WONG: Thats right. Look there are a couple of jobs Ive done in opposition. The one youve outlined and also I did the Corporations and Financial Services job in opposition. But obviously theres a lot of work in this portfolio. I am also following a very good Finance Minister Lindsay Tanner. But I will apply myself with diligence and be as thorough as I can be because I think that is what the job requires.
GREENWOOD: Its very funny. I think back to Senator Walsh, one of the great Labor Party Finance Ministers, right, who was a hard head. And its true to say that Lindsay Tanner was exactly the same way. You need to have a hard head in that Finance portfolio because simply youve got every Minister coming along with every scheme. And effectively if they were given a free reign the Budget would be completely out of control. The question is whether youre tough enough to be able to stand there in front of all of those ministers and say no?
WONG: I always think that you measure people in terms of their toughness by what they do, not by them telling you how tough they are. Thats always been my experience through my professional life. I think most people would agree with that. I know that its very clear what our job is. We have to limit growth in spending. We have to return revenue to the Budget. We need to get ourselves to a position where were in surplus by 2012-13 and were on track to do that. But to do that is going to require discipline. Ive made some comments publicly that we are in a minority Government. Theres obviously going to be a range of things we have to negotiate to get things through the Parliament. But what Ive made very clear is that we are not going to be in a position to negotiate on the return to surplus.
GREENWOOD: That 2 per cent spending, if you like, the roof almost, that youve got across the spending in other words, trying to keep spending under inflation and therefore cut in real terms until the Budget is back into surplus is it still a situation right now where you recognise that the Reserve Bank is likely to be raising interest rates at the same time that the Government is continuing to stimulate the economy?
WONG: Obviously interest rates ultimately are a matter for the Reserve Bank. But we are very conscious of the need to run a very sound fiscal strategy. And lets understand what were doing. We are winding down the stimulus. Stimulus is being wound back and in fact will subtract from growth in 2010. What we also need to do, as you pointed out, is hold to the 2 per cent spending cap until the Budget returns to surplus. Now thats a very substantial task. Not a task that Mr Costello in his last five Budgets managed. The average over the last five Budgets of the Howard and Costello Government was I think 3.6 per cent in real growth. So I dont underestimate the task at hand and that we will have to work hard to both find savings and to limit growth and expenditure. Well have to work also with the Parliament to do that. But I think the Australian people do expect all of us the Government and the Parliament to ensure that this Budget comes back into surplus.
GREENWOOD: Is what youre telling me though, as the Finance Minister, that some of the political expediencies that quite clearly a minority Government will have to go through, and some of the deals that may have to be done with independents, are going to be pretty hard to balance up with in fact trying to fulfil this aim of having that 2 per cent spending cap?
WONG: I think what Im trying to say Ross is this: we will have to negotiate on many things in this Parliament. But we are not in a position to negotiate on the surplus. And my view is that Australians expect not only this Government, but will expect all parliamentarians in this Parliament to deliver sound economic management. As the economy continues to grow, that sound economic management has to include a responsible fiscal strategy that reduces growth in spending and returns the Budget to surplus.
GREENWOOD: And I cant let you go without asking you about your previous portfolio. That is of course what is considered by many to be a backflip in the Government, again for the political expediency weve talked about; and that is the reintroduction of a carbon tax. How would that affect the public finances of your portfolio?
WONG: Look Ross, I think what weve outlined very clearly is the process of building agreement within the Parliament and the community around how we tackle climate change and how we properly price carbon. We went to the election with a set of policies. Since that time, we have seen agreements with the Independents and the Greens which include a cross-party parliamentary committee. And thats the issue that Greg Combet the person who has now got the portfolio of climate change is working on.
GREENWOOD: But the other side of that is the preference now for an emissions trading scheme or a carbon tax based on the fact that youve now got the Finance portfolio, which of course gives you a different set of priorities.
WONG: (laughs) Ive always thought that this is an important economic reform and needs to be done in an economically responsible way. And I think building agreement within Australia around a sensible economic reform on this issue, as on many others, is important.
GREENWOOD: I guess the final point I want to ask you and Ive asked certainly Lindsay Tanner this in the past I mean, that is the lessons of the Keating Government in the recession we had to have was that the spending was not cut and as a result, the heavy lifting, the cause of the recession, was left for the Reserve Bank. Do you believe right now that the Government works hand in glove with the Reserve Bank to make certain that there is not a repeat of that episode?
WONG: I think its very clear by the way in which our stimulus was constructed that it was timely, it was targeted and also temporary; that we were very cognisant of the need to do as you said to ensure that both fiscal and monetary policy worked hand in hand. Thats why were seeing stimulus being wound back. As I said, we estimate that stimulus will subtract 1 per cent from economic growth in 2010. So we are doing precisely what youre suggesting, which is ensuring that we run a sound fiscal strategy as the economy starts to grow.
GREENWOOD: Senator Penny Wong, Finance Minister, we appreciate your time here on Money News tonight.
WONG: Good to speak with you.