4BC Mornings with Greg Cary - 11/05/2011

11 May 2011

CARY: Good morning Penny.
WONG: Good morning; quite an introduction.
CARY: Are you happy to share that responsibility and do you accept the premise?
WONG: I am absolutely happy to share the responsibility. And that's why we've delivered a Budget that despite the hit on revenue due to the hangover of the GFC, the floods, the cyclone and also the high dollar which as you know is impacting a lot of firms we are bringing the budget back into the black, focusing on jobs and getting more people into jobs.
CARY: Just on that notion of bringing the budget back into the black $49.3 billion dollar deficit this year; forecasts of $22.6 billion next year. How are you going to get it back into the black the following year?
WONG: We've laid it all out in the budget papers. And we've done it by saying no to spending. So in terms of your introduction I'd make this point. Over the budget period we will deliver an average growth in real spending, real growth in spending, of about 1 per cent a year. Peter Costello's last five budgets delivered real growth in spending of 3.6 per cent a year.
The last time a federal government exercised this much restraint in spending was in the 1980s. So that's just to give you a bit of context. We've made $22 billion worth of hard decisions to bring the budget back into the black and we've reprioritised expenditure as well as saying no to spending initiatives.
 
CARY: Penny, what were the hard decisions? Because we've been told about this for the last few weeks, it's going to be really tough and really hard. Who's been affected most by this?
WONG: We have changed, for example, the Fringe Benefit Tax arrangements on cars because that was a poorly designed concession which did give people this incentive to drive more just before the end of the financial year. There's a saving from that. We have also removed a tax offset called the Dependent Spouse Tax Offset which has actually been in the Tax Act since 1936.
CARY: Why have you done that by the way?
WONG: Well that's an important measure because that's about participation. It's saying look, in this economy we don't want to be paying people not to work. We want to be putting money into getting people into work. And this is a tax offset which is about basically giving people money not to work. We have phased it in so it's abolished for anybody under 40.
We recognise that there are older partners who wouldn't have been in the workforce for some time. And so we've retained it for people over 40. But anybody who was born after 1971 is going to not be able to claim it. This is obviously for people without children because they get family tax benefits. But we think this is an important measure. But it's already been opposed by Mr Abbott.
CARY: The point has been made about the carbon tax, the so-called elephant in the room and a lot of people don't necessarily like the phrase. But a lot of the add ups and the take aways are based on the notion of it not being there. But how can we do that? How can we project three years forward without knowing what the impact of that tax is going to be in all kinds of ways?
WONG: Greg, we will account for the design and any effects of the carbon price when it is finalised, and we are. In doing that, doing just as John Howard did when he announced a GST in 1997 and didn't put it into his next budget, but did it subsequently. We will do that. The reason the Opposition want to talk about that is because they don't have an answer on the Budget.
I mean, we've seen Joe Hockey boasting over the last week that he would bring the budget back to surplus by 2011-12. Yet he has already come out and opposed some of the savings measures in the Government's Budget. Well you can't come back to surplus and you certainly come back to surplus earlier if you're not prepared to cut expenditure, which is what we're doing.
So Mr Abbott's got a big job tomorrow night. He's got a big job to show that he's up to the task of bringing the budget back to black. And all that's happening is Joe Hockey is making it harder for him.
CARY: Okay. I'll talk to Joe Hockey in just a moment. A lot of the economic analysis this morning is based on your premises related to China. And a lot of them are saying well, you know, if inflation takes over and if China corrects and the figures don't add up, that you're basing China's contribution to our economy, then we could be in strife. How do you respond to that?
WONG: There's no doubt that our region China being a key driver of that is extraordinarily important for Australia's economic future. There's no doubt about that.
But we have, in these budget papers, made assumptions which are broadly in line with the assumptions that those in the markets have made.We know that those assumptions are sound and we have also made sure that we can restrain expenditure. That's a very important part of bringing the budget back to surplus.
CARY: Let me just get to a couple of our listeners' emails as time runs out. Peter from Sunnybank Hills and a number of other listeners is concerned that people on disability pensions will have their benefits reduced if they don't work, even if their disability prevents them from working in the first place. Is that the case?
WONG: We do want to encourage and support more Australians into work. But we want to do it in a way that makes sure it actually helps people get into work.
In terms of the Disability Support Pension we have said we want to put in place stronger participation requirements, particularly for those under 35. This applies to people who do have a capacity to work in excess of eight hours a week. But we have also set out in the budget papers additional supports for people with a disability.
This is part of a broader agenda to try and get more workers into the workforce. And that's very much a Labor agenda, Greg. This is about jobs and getting people into jobs.
CARY: Okay is that also a tacit admission that middle class welfare and welfare in general has gone too far?
WONG: It's a recognition that our economy will need work workers. We've had 750,000 jobs created under this Government to date. We know that we're forecasting another 500,000. We need to bring more people into the workforce. And what this Budget does is to change some of the incentives that currently don't help people get into the workforce.
So for example, we are ensuring that single parents can keep more of every dollar they earn by the changes we've made; that's an important incentive. It puts in more services but it also puts in greater obligations and responsibilities. And that's appropriate.
CARY: OK, well it is. So I guess that is an admission that we've made it too easy for some people not to work.
WONG: I think it's a recognition that getting people into work is a good thing, not just for our economy, but for them. And we make no apology for putting additional responsibilities and obligations on various groups jobless families, teenage parents because we need to reduce the number of jobless families. And we need to ensure that children don't grow up in jobless families; it has to be the objective.
CARY: Yes, a lot of people would agree with that. Coming back to our listeners and the disability pension. How will it be determined whether or not a person's disability is severe enough to prevent them from having to look for work? Who makes that ultimate decision?
WONG: Well these decisions aren't made by politicians, are they? I mean these decisions are made by public servants and by medical practitioners and there is a very detailed process of assessment of people's capacities which Jenny Macklin's portfolio Jenny Macklin, the Minister has oversight of.
So we are not trying to impose a politician driven solution. What we're saying is let's get people who can work into work. Let's try and give them the incentives and let's give them the support.
CARY: OK. Just finally, can I ask you philosophically, as you sat with the Treasurer and colleagues framing this Budget, philosophically what was it you were wanting the take home message to be? What were you trying to achieve?
WONG: Look it's a very good question. And I think it's a Budget that's imbued with Labor values. We are a party that values work. We are a party that prioritises jobs. We're a party that recognises the importance of responsibility as well as opportunity.
And this is a Budget that recognises the changing economic circumstances we find ourselves in: a mining boom that's coming, that's gathering pace, but some softness in the short term. But we recognise the economic circumstances and we're trying to get the most out of them the most opportunities for more Australians.
CARY: I appreciate your time this morning.
WONG: Really good to speak with you.
CARY: Our Finance Minister Penny Wong from Canberra this morning.
ENDS