GREENWOOD: First up on Money News tonight. The person who really was responsible for trying to get the cuts out of the Budget. And that of course is the Finance Minister Penny Wong who joins us here on Money News. Many thanks for your time Penny.
WONG: Good to be with you again.
GREENWOOD: Heres the interesting point. I spoke with a very senior chief executive today of a major Australian company who said to me if he had produced a budget for his shareholders in May this year that projected a $22 billion deficit and in November/December it had blown out to $37 billion, he would be sacked immediately. Why should this Government on the projections of this year suddenly be held in the publics confidence?
WONG: Well would you have anticipated what has occurred in Europe and the global economy in May of this year?
GREENWOOD: Only thing is, Im suggesting that so far, so far at least anyway, the European situation has not necessarily touched Australia in a significant way.
WONG: I dont agree with that, I think youll see in this years mid year update that weve seen a hit on government revenues over the forward estimates of $20 billion. That means we are getting $20 billion less over the forward estimates budget period than we anticipated at the budget time.
GREENWOOD: These are all projections. This is over the next four years, just to explain to people. And the $20 billion is there. So in other words, youre doing a little bit of conservative management of the Budget. But the point still remains that today, this year certainly, that this budget deficit is going to be much larger than anybody would have anticipated which has opened you up to the charge of course, that youve featherbedded the budget this year, increased the deficit this year so that you can achieve a surplus next year.
WONG: Lets remember a couple of things should we. The first is theres not just one surplus thats projected, there are a number of surpluses that are projected over the budget period from 2012-13 onwards over the subsequent three years. The second thing Id say is this have a look at what the deficit this year has increased by and why.
About $5 billion of it is lower tax receipts. About $2.3 billion is additional spending on natural disasters such as the rebuild in Queensland, about $3 billion is assistance to households and business from the Clean Energy Package. And theres about $1.4 billion from accelerated infrastructure funding. So these are spending demands, some of which are simply lower tax receipts and some of which are important things such as the rebuilding from the floods
GREENWOOD: Everybody in this country would forgive you that because any government would have to wear that. One small thing what about that Clean Energy cost that you spoke about there. Is that not a cost that otherwise might have been in next years budget and not in the current years budget?
WONG: This is an announcement we made in July, we made a very clear decision to provide some upfront assistance, not all, but some upfront assistance to households and to business in this year ahead of the carbon price coming into place. And that is a sensible policy decision, its about saying we want to make sure that people have the capacity to deal with the small impact of the carbon price as and when it happens.
But if I can take one step back this is a budget where we have more than offset all new spending. So if you want to come back to your first example about why is the deficit bigger - we have offset all new spending just as we did in the budget. Just as we did in the election campaign. Now that is a very significant fiscal discipline that hasnt been seen before at a time when were battling lower company tax receipts, lower capital gains receipts and low personal income tax receipts because of the effect on the economy of a weaker global economy.
GREENWOOD: Lets go to the poor old public servants. Now youve already squeezed them up, 1.5 per cent in the last budget. Effectively told the department heads theyve got to find 1.5 per cent efficiency dividends or savings if you like. Youve now gone back to them and said theyve got to find another 2.5 per cent. Surely, at some point in time youre going to get some push back from those public servants.
WONG: This is a difficult decision. And when youve taken a $100 billion worth of savings already over your past four budgets, theres not a lot of easy decisions left and this is a very difficult decision and Ive no doubt there are some people are not very happy about it. I accept that.
GREENWOOD: Have you taken a view on how many public servants, federal public servants will be sacked as a result of that decision?
WONG: Our position is we should look first to savings in non staffing areas such as reducing consultants, minimising media and advertising expenditure. Those sorts of back office and other expenditure savings. In terms of jobs, Id make this point. There is a significant amount of turn over in the public service there is I think, 7 per cent attrition rate across the public service. And our expectation is that there is not going to be a requirement for forced redundancies.
GREENWOOD: In other words, youre not counting out the prospect of forced redundancies if your department heads to whom you have given the responsibility of this productivity bonus, can simply find no other way other but to actually reduce their headcounts.
WONG: Our expectation is no forced redundancies, ultimately, how agencies meet these savings is a decision for heads of agencies and we have a clear policy in place in relation to redeployment. And well also be supporting agencies finding these savings and weve laid out a consultation process and an implementation process for that.
GREENWOOD: Also, one other point that has been increased of course is the unemployment rate which will eventually get to 5.5 per cent is the forecast. Now quite clearly, there are some individuals who are going to be affected by that rising unemployment rate. Is there much support around for them?
WONG: Look, lets remember the budget updates forecast more jobs. 300 000 new jobs by June 2013.
GREENWOOD: But a higher unemployment rate.
WONG: That is true because we are not immune as an economy from what is happening globally. But 5.5 per cent and 300 000 new jobs when youve got Europe at double digit unemployment rate, youve got the US at nine plus per cent. We do compare very well because our economys fundamentals do remain very strong.
GREENWOOD: Penny, youre from the Labor Party, you would understand the person who loses their job doesnt give a rats about somebody in Europe or the United States and their unemployment rate.
WONG: And because we are the Labor Government we have prioritised both through the global financial crisis and this budget update, ensuring we keep the economy strong and we support jobs.
GREENWOOD: Finally, a piece of good news Fitch Ratings has upgraded the Australian credit rating effectively from AA plus to AAA. This is genuinely good news and as you pointed out, comparative to other Western economies right now, we are still in a very strong position.
WONG: And it demonstrates the importance of the Governments discipline and the fact that the Fitch has now said were AAA as well. Its the first time in Australias history, weve received a AAA rating from all three global ratings agencies is really an endorsement of the Governments budget strategy.
GREENWOOD: Penny Wong, our Finance Minister, we appreciate your time here on Money News.
WONG: Good to talk to you again.
ENDS