MCGLUE: Joining me is Finance Minister Penny Wong. Minister, good morning and welcome to ABC Local Radio right across Western Australia.
WONG: Good to be with you.
MCGLUE: Penny Wong, youve thrown out your old financial forecasts, adopted some new ones, and now the Government is saying the budget will return to surplus in 2015-2016. Why should we believe these forecasts when you have failed before?
WONG: I understand we'll take some political criticism for the fact that we did have to confront these changed economic circumstances, but let's just go through the facts, and I'll explain the choices the Government's made. The facts are that we've seen a big write down in revenues and this is not just a small amount. This is the second largest write down in revenues since the Great Depression. So this is very big by historic and economic standards. The Government's getting a lot less tax than it anticipated.
So we had to make a decision when confronted with that how would we respond? And we made a decision that you have to put the economy, jobs and growth first. We knew if we chased revenue down and continued to cut very hard in the next couple of years, what you're risking is higher levels of unemployment and slower levels of growth, and thats not good for families or for business.
The second thing we had to decide was, what are we going to do for the big reforms?. I think you described them as Labor reforms, but they're about the nation and that is DisabilityCare, the next stage of Medicare caring for people with a disability properly and our schools reform, which is all about making sure we dont leave so many children behind. We had to make space for that and thats what we've done.
MCGLUE: Penny Wong, I appreciate that revenue has come in under the forecast figures that you had in last year's Budget, but why didnt you simply cut back spending to stay within your means?
WONG: Really, thats the first choice we had. We could have done that, but there's a consequence to that. If you cut spending that hard and remember we took a $17 billion hit just in this financial year since the last Budget what that means is you're cutting really hard in services Australians need; frontline services. And our judgement was and I think the Treasury made that very clear is that this would affect jobs and growth. We can't risk having high levels of unemployment and risk economic growth. Thats bad for the country and ultimately it's bad for the nation, economically, long-term.
What we have done is build a path to surplus by the end of the forward estimates so thats in 2016-2017. And just overnight, we've had the ratings agencies reaffirm the nation's AAA credit rating on the back of the Budget.
MCGLUE: The thing about cutting back spending is that thats what most people do in their own lives in managing their own budgets. They spend within their means and if it looks like expenses are getting ahead of their income, they cut back. And they tend to take a conservative view of income that might be coming but they can't really be sure of.
I mean, thats what happens in households right around the country. Why doesnt the Government do the same?
WONG: But we have been doing that. I mean... I think one of the facts that needs to be reiterated is that we actually did anticipate less revenue this year than previously and we actually took what a write down in both the mid-year review and in the Budget. So we said, well, this year we will get less. No one anticipated this level of write down as I said, second biggest since the Great Depression.
We also have found savings, things some of which we'll be criticised for, some of which have been bitterly opposed. Things like the Private Health Insurance rebate changes, the Baby Bonus changes that I think have been a subject of discussion. We've taken responsible savings, a lot of them $43 billion. And the reason we've done that is to try and fund, show how we'll fund DisabilityCare and our schools reform, not just for one or two years, but for the decade.
MCGLUE: You're with John McGlue on 720 ABC Perth and ABC Local Radio right around Western Australia. Finance Minister Penny Wong is my guest. 1300 222 720 is our number.
What's your take on last night's Budget? Have you got faith in Labor's forecast this time around? And all this emphasis that you're hearing from Penny Wong and her colleagues about nation building and jobs and growth, is it going to sway your vote when the election comes around in September? 1300 222 720.
Penny Wong, all the goodies in this Budget are predicated on your revenue assumptions going forward and that includes NDIS and Gonski, as you mentioned. If your revenue assumptions dont come through this time, or things happen outside of your control as youve argued happened this year how then are you going to pay for these social packages?
WONG: I think it's wrong to say we're only relying on revenue growth to fund them. Let's just go through the savings which we're taking and the funding sources we're putting in place for these reforms. So DisabilityCare, we've got the Medicare levy increase which we've been upfront about. Every cent of that will go towards DisabilityCare. We've got the Private Health Insurance reforms, superannuation reforms, and a range of measures in the health space, and all of those savings are going towards funding DisabilityCare.
When it comes to education, what are we using? We're taking some of the growth funding from universities, so we're asking for them to grow more slowly. It's not a cut, just growing more slowly. Our family payment saves including Baby Bonus, and of course the business tax changes. All of those things are going to funding the schools program, the schools reform. So these are many controversial savings in the list I've just given you, but the point is we're making savings, spending cuts as well as continuing to ensure the economy remains strong.
MCGLUE: But, isn't the point also, that if you don't have the revenues come through as you're forecasting now, you're going to be short in terms of the money that you need for those social programs, for education, for the Gonski reforms, and for NDIS? And if that revenue doesn't come through, what are you going to do? Are you going to fund this out of debt again?
WONG: John, we've just taken the biggest hit on revenues, certainly that I've seen since I've been Finance Minister and certainly the second largest since the Great Depression. These are very, very prudent assumptions we're working with.
I think the thing that probably I need to explain is it has taken, I think, all economic commentators some time to get a handle on just how the Australian economy is going to respond to two key things. One was a dollar that remains stubbornly high and the second was the falling commodity prices happening at the same time. And the combination of those two things has hit profits across the economy much more than anyone anticipated. We've seen company profits dropping for five consecutive quarters and what that reflects is how the economy is responding to a high dollar and lower terms of trade.
MCGLUE: But if we talk about assumptions, they seem to be at the heart of the argument over economy credibility. The assumptions that you've made on the mining tax for example to date; you've got around $200 million in revenue from the mining tax and over the next four years you're assuming increases of more than 1000 per cent in revenue from that. How is that seems an extraordinary figure to me, given how wrong you've been to date. Why can we believe that now?
WONG: I'll make a few points about the mining tax. First, it is a volatile tax, as you know, just like the PRRT, which is the other resource rent tax. And it will fluctuate according to the profit levels of miners, which of course of are driven by a range of things, the high dollar and the commodity prices being amongst them. So it's going to fluctuate from year to year quite significantly, depending on those things.
The second point I'd make is even if people are critical of the mining tax that is only a small fraction of the revenue write down we've taken. So, I know that the Opposition wants to say it's all because they got the mining tax wrong. Well, even if you accepted that, which I don't, the revenue write down where we're taking that is the reduction in money that the Government gets through tax is only fractionally driven by the mining tax.
And just in terms of tax, the point I'd make is in this coming financial year if you measure tax as a share of the economy, ours is 22.2 per cent. That is much, much lower than we inherited from Peter Costello. In fact, if I was getting the same amount of tax Peter Costello got as a share of the economy in his last year as Treasurer, we'd have some $24 billion more in revenue in 2013-14.
MCGLUE: Penny Wong, Wayne Swan said last night that there was nothing he was more proud of than his record as Treasurer. If that's right, how come most Australians think the Government isn't doing a good job?
WONG: I think peoples you can't in politics control what people think of you. What you can control, or what you can do is try and make the right choices in the circumstances that you're confronted with. And one of the choices the Government's made, when it comes to the economy, when we were confronted with the global financial crisis was to support jobs and growth. When we were confronted with the situation now with a massive write down in revenues, it was to support jobs and growth and invest in the future.
What I think is important is what sort of future do we want. There's always a lot of talk about who did what and who said what and whether x or y did something wrong. But ultimately, budgets are about choices. They're about what sort of future you want, just as elections are ultimately about what sort of future you want for the country.
MCGLUE: Penny Wong, thank you.
WONG: Good to speak with you.
ENDS