BYNER: Good morning.
WONG: Good morning Leon.
BYNER: If you could give us a lesson here about why the dollar that is really, really strong at the moment is actually creating grief for us.
WONG: Sure.
BYNER: Can you do that?
WONG: Yes, Ill give it a shot Leon. We do have a high dollar at the moment; a dollar which was, for example, when figures were previously done around 85 cents at budget time. Its now at or around parity, that is, equivalent with the US dollar. And as a result of that, that is hitting Government revenue. So because certain companies exporting overseas where they are being paid in the equivalent of US dollars obviously when youve got a high dollar, they earn less.
So that means that weve seen about a $10 billion hit on Government revenue that the Government released yesterday in the Mid-Year Economic and Fiscal Outlook, the budget update we released. But the good news is that despite that hit on revenue, we remain on track to bring the budget back to surplus in 2012-13 just as we said we would. We remain on track to bring the budget back to surplus.
BYNER: Ok so the question is that $10 billion hit what makes up for that that still gives us the surplus?
WONG: What weve made sure we have done all along the way from the election in the lead up to the election where we offset all new spending when we released the MYEFO, the budget update (inaudible) the offsetting savings that weve made in this last period and all of that was released yesterday. We also see, obviously we have got a very good set of figures in the budget update. We see higher growth, more jobs, lower unemployment and that flows through also to improving some aspects of the budget position.
BYNER: Penny, try and work this one out for us. Now there are some businesses that are doing really well and there are many who are saying that the mining sector, and our exports and the price of raw materials, is holding us up. But what do you say to people who will come to you and say, Senator, I am a South Australian and I am running a business. Im finding it tough at the moment, yet Im being told there is all this expansion and growth. And they say where?
WONG: Its a very good question, Leon, and really it demonstrates one of the significant challenges we face as a country at the moment because the challenge of the last term was to make sure we avoided a recession. The challenge of this term is to manage growth. We are growing, but of course were not growing evenly. And there are some sectors of the economy which are growing slower than others what the Prime Minister called a patchwork economy. There are some businesses, including in Adelaide, who find a higher dollar very challenging to deal with. It makes it really tough.
What we have to do is broaden and strengthen our economy. Thats why we are so committed to the minerals tax because what that will enable us to do is reduce company tax rates across the economy. Thats about giving businesses across the board, including in areas which are finding it tough because of the higher dollar, a tax cut.
BYNER: But Penny, I understand the minerals tax youve argued. But if you are selling minerals in US dollars, it means that we are not getting the money for them that we thought we would at 85 cents. And the danger of course for that, is that a lot of people are predicting that we might do a lot better than parity in our dollars value which in turn puts more pressure on that surplus that youre looking for.
WONG: The dollar moves and I am not going to speculate about where the dollar will or wont move to obviously but the Government has got some very strict fiscal rules in place. We are going to deliver the fastest turnaround in the budget since the 1960s. We are on track to do that despite the hit on revenue and we are absolutely intent on delivering this. Its the largest, fastest return to surplus since at least the 1960s. Now that will take discipline and the discipline has been demonstrated through the election campaign and in the budget update that we released yesterday.
BYNER: Whats the biggest disadvantage that we face right now?
WONG: I think the biggest challenge is, as I said, managing growth. And in many ways thats a very good problem to have, isnt it? I mean if youve got unemployment
BYNER: Not for interest rates its not.
WONG: No, but if you have got unemployment projected to drop, jobs projected to grow and the economy projected to grow, they are good challenges to have. Id rather be in this position, wouldnt you, than what some other countries have where you have got an unemployment rate of 10 per cent and growth very slow.
But it does mean we have to press ahead with those reforms, which are about building the capacity of our economy so that we can continue to produce more, we can do more, we can make sure that there is less upward pressure on inflation. Thats about investing in infrastructure, investing in skills and bringing in the company tax rate cut that we want to bring in.
BYNER: Penny Wong thank you, for joining us today. Thats Senator Penny Wong.
WONG: Good to be with you.
ENDS