JOURNALIST: Penny Wong joins us now, Minister for Finance and Deregulation. Welcome to the studio.
WONG: Good to be back here.
JOURNALIST: And it is good. I saw you through the glass doors as you got out of the lift, you poked out your tongue in a very Penny-esque moment.
WONG: You are a dobber Matt, you really are a dobber. A bit of joshing with you in preparation for the interview yes, thats right.
JOURNALIST: For jousting! A bit of joshing in preparation for jousting. Congratulations on getting the Finance portfolio. Its a very senior, senior role.
WONG: Its a great opportunity, a very exciting job, a very interesting job and Im looking forward to getting stuck into it.
JOURNALIST: Now one of the things that you were handed when you got the job, soon after, was something that the Weekend Australian referred to as the Red Book, the little Red Book. Basically its a warning from Finance saying
WONG: From memory it was actually a white folder, but it is called a Red Book.
JOURNALIST: So its a white folder called a Red Book and it basically set out some warnings. What are they?
WONG: The Department made a decision to release that book publicly and it lays out a range of the issues that the Government faces and most of them are really quite consistent with what we have been saying. We face a range of spending pressures. We have very strict rules in place about how we want to run the budget and bring it back to surplus and also to limit growth in real spending. Weve been saying that for some time and really this simply confirms it.
JOURNALIST: And it said, well, that its going to be difficult to get the budget back into surplus as you promised by 2012 2013. You have got to find $2.4 billion to pay for the new as yet unfunded commitments to the independents and the Greens. Is that correct?
WONG: What we said in relation to those commitments is that we will offset any spending out of those funds that occurs. So we will have to offset any spending.
JOURNALIST: That means youve got to find some savings.
WONG: Well that depends how much is spent. Obviously those funds have boards who assess the various projects which come forward. So the extent of the spend in any one period depends on whats ticked off by those boards. But look, just more broadly we have very strict fiscal rules in place. And the reason we have is we are absolutely committed to bringing the budget back into surplus. We are in fact going to deliver the largest, fastest return to surplus of any Government since the 1960s. Its a big challenge but its one, as I have said, we have to deliver on.
JOURNALIST: But is it correct that you have been given a list of savings, a hit list, including eligibility for pension, superannuation concessions, defence spending and private health rebates?
WONG: David, I think it would be unsurprising if the Finance Department wouldnt tell politicians about all the things that would be available if people wished. But obviously those are decisions for the Government. So departments might put forward lists into the public arena. Thats their prerogative. Its up to the Government in each Budget round to determine the approach we take and well be doing that.
JOURNALIST: The Red Book also recommends that the Government maintain, or have or adopt a flexible approach to workplace reform; that you dont just rule that off. Youve insisted that the Coalition rule it off and youve ruled it off. And so are you going to ignore that advice as well? The Red Books starting to look a little bit pink.
WONG: We have a pretty clear position on industrial relations, Matt. We went to the previous election being very clear about our position, and this election being very clear about our position. We think we have the right system in place, a fair system. A system that is sufficiently flexible but that also is fair.
JOURNALIST: So you will ignore the Department of Finances recommendations on that front?
WONG: And that stands in stark contrast, if I may say, to Mr Abbott who we know from the media today is facing a lot of pressure internally to return to Work Choices. I mean the Liberal Party cannot help themselves on this issue.
JOURNALIST: So Tony Abbott is doing what the Department of Finance wants you to do.
WONG: Tony Abbott is doing what some people with some extreme views, the architects of Work Choices, want him to do.
JOURNALIST: And the Department of Finance, your own department.
WONG: What Tony Abbott is doing is being pressed by people, such as Senator Abetz, who were the strongest advocates for Work Choices in this country. A system that I think everybody knows was not good for many working people and their families.
JOURNALIST: But Tony Abbott might just have read the Red Book and thought, well, gee the Department of Finance, we pay them to advise us. They are impartial, theyve got the expertise, theyre suggesting that I re-look and that the Government re-look at workplace reform. Maybe thats a good idea. Penny Wong is looking at the Red Book and going nah.
WONG: Whether its Finance, Treasury or other economic commentators, I think everyone agrees we do need a plan for the future. We need an economic plan for the future. The challenge of the last term of Government was to avert a recession and to support jobs. The challenge this term is to manage growth. Now that actually goes to
JOURNALIST: The Department of Finance arent economic commentators, are they?
WONG: If you could let me finish.
JOURNALIST: Youre bundling the Department of Finance, your own department, into the same category as, I suppose, Access Economics and all the others.
WONG: And what Im saying is as somebody whos read the little, the Red Book is that
JOURNALIST: The little Red Book I think youve read both!
WONG: I probably havent and thats anyway, thats a different story. What we do know is that the challenge for this term is to manage growth and to try and improve productivity. Thats why we have an agenda, a plan, that is about investing in the NBN, investing in skills, investing in infrastructure. That stands in stark contrast to Mr Abbott whose plan at the moment appears to be a return to Work Choices.
JOURNALIST: Have you been warned that the water buybacks under the Plan to be released on Friday will cost a lot more than previously budgeted?
WONG: We made a commitment in the election that I think Tony Burke has been on your program to speak about again, where we said we would continue to buy the water that was needed to meet the sustainable diversion limits, so the new cap on the Murray Darling Basin. Now there is already money within the federal budget over the forward estimates period, so over the budget period, to purchase and also to invest. So the extent to which you need to continue to purchase will depend on what the sustainable diversion limits will be.
JOURNALIST: That was the question have you been told to expect that youll need a lot more money.
WONG: I havent seen the Plan, as Ive said to you before. I think this Friday is due for the release. Obviously that is a Guide to the Plan so well get some sense of what the Authority is suggesting.
JOURNALIST: And youre locked in. So even if the Plan says its going to cost you an extra billion dollars, thats tough titties. Youre locked in. That was your promise.
WONG: I dont think Id quite use that phrase, but what we also said at the time is that we would do it in a fiscally responsible way and we will. And that means we will continue to buy each year and through the years ahead in order to meet that gap.
JOURNALIST: Youre handcuffed in on it though
JOURNALIST: Well because you said whatever the Authority recommends, we will implement. And presumably thats in the timeframe thats recommended.
WONG: Im not commenting on the guide that hasnt come out and you might recall under the legislation, we have a guide and then the statutory draft Plan and then there will be a Plan. So the SDLs the sustainable diversion limits, the new caps are not actually set until the Plan is finalised. And whats being released on Friday is really the first step in that process. But look, as Tony said, we dont walk away at all from our election commitment. What we do say is that we will do it in a fiscally responsible way.
JOURNALIST: Are you going to continue as Finance Minister the practice of bailing out state governments? The Auditor-General here has shown the extent to which the books, the South Australian books, managed to look half-decent almost largely because of the Federal Government. Hundreds of millions of dollars of federal funding has flowed into Kevin Foleys coffers and that is whats brought his budget into surplus. Are you going to keep doing that?
WONG: Well we didnt put money into Kevin Foleys coffers, we put money into South Australian schools, South Australian infrastructure and South Australian families, additional payments and other forms of support.
JOURNALIST: But can you continue to do that at that level?
WONG: What we have said, that was the stimulus. A lot of that was the stimulus and we are winding that spending back because obviously we have come through a period of very uncertain economic times, the worst Global Financial Crisis since the Great Depression. We are in different times now and the job now is to manage growth and that means spending restraint.
JOURNALIST: Now coming up in a moment, spending restraint for one of our listeners, Brian and his wife. And were getting a number of SMSs about this people unable to redeem their money from quite recognised investment vehicles. In this case, its Colonial First State, but there are a number of others. Theyre told, even though they filled out hardship provisions, theyre not making any difference. We would like your view on that if you could listen in a moment to Brians story in just a tick.
Well talk to Jamie Briggs, hes the Federal Liberal MP for Mayo. But hes been corresponding with Colonial First State on behalf of Brian. Brian and his wife are trying to get money back from Colonial First State that is in a mortgage income fund. Brian joins us now. Good morning Brian.
CALLER: Good morning.
JOURNALIST: Brian how long has this been going on for you, trying to get this money back?
CALLER: 21 months now it is. Ive just done the calculation.
JOURNALIST: And why do you want the money?
CALLER: Well I just want to get everything back into one place so we can start planning for the rest of our lives. We are both retired and when I retired my wife retired before I did we tried to pull everything back out of Colonial First State, we did all the paperwork etcetera and asked for it to be rolled over into a state superannuation fund.
JOURNALIST: So this is a super-style investment with Colonial First State?
JOURNALIST: Now when you filled out the forms, is there any indication that youre not going to be able to get your money back? In other words, what were doing is we understand that theyre just dribbling it out in three monthly intervals.
CALLER: Thats about right, yes. Now theres nothing in the original paperwork. It states quite clearly in the option I picked was I would like this withdrawal to be made in line with my investment allocation on the date of this transaction. Which is the date that we actually signed the paperwork. It wasnt until we received the first documentation from Colonial First State which actually had us confused for the first few minutes because it says your rollover has been completed. When you open the letter you find that its the first three months rollover thats been completed. Its been the same ever since.
JOURNALIST: Are they blaming the Global Financial Crisis for this? They say theyre winding up this particular fund.
CALLER: Well I suppose they are in a sense. Theyre stating that mortgages arent easily turned into cash and that by suspending withdrawals, payments can be made as sufficient cash becomes available.
JOURNALIST: I suppose though the idea of investing with a major fund is that theyre able to theyve got lots of cash, lots of investments. So if theyre having problems winding up a particular one as fast as theyd like, theyll be able to pay you out with other money that they have.
CALLER: Well I wouldve thought so. I mean its a matter of accounting I suppose. They are advertising that they have $90 billion under investment. I understand thats about half the amount of money thats in the United Kingdom gold reserve. So thats quite a little bit of money lying around.
JOURNALIST: Weve got a number of texts here: Hi Matt and Dave, my Mum had money invested but has since had to buy a place in a nursing home. Her money is only available to draw down five per cent of the capital every three months due to, shes told, the Global Financial Crisis. Annoying. Cheers, says Jen. And another text: I too have money invested and am unable to redeem due to the GFC despite lodging stat decs and meeting their hardship criteria, says Sue of Macclesfield.
Brian, do you get told how much money youre going to get each quarter?
CALLER: No, it varies. I think the most weve had out is a bit over $9000 and the least was a bit over $2000. Theres no indication as to what its going to be or when this is likely to wrap up.
JOURNALIST: And they hope to do it every three months according to their corro?
CALLER: Well so far they have, so far they have fulfilled that part of their own obligation, yes.
JOURNALIST: Alright. Now Jamie Briggs is a Liberal MP for Mayo. Jamie Briggs, good morning.
BRIGGS: Good morning Matt.
JOURNALIST: Youve written to Colonial First State on behalf of a number of investors. Are you happy with their response?
BRIGGS: Not at all. I mean I think there was some criticism of the Labor Government when they introduced the bank guarantee during the Financial Crisis, everyone agreed there should be a bank guarantee. However the Labor Government made theirs unlimited and that caused some problems for funds like this. Therefore people like Brian had their money frozen. At the time, that was what the debate was about. However I think two years on and I suspect Penny would agree with me on this it does seem very odd that financial institutions such as Colonial First State, which is backed by the Commonwealth Bank, doesnt have the money to pay out small investors like Brian. It seems very, very strange and you know it puts great hardship for people such as Brian and I would have thought Colonial, in the interest of fairness and being a good corporate citizen would finalise these accounts as soon as they possibly can. It just seems to be a very convenient excuse to be withholding money, not giving any timeframes, not giving any certainty when people can actually get access to what is essentially their money of course.
JOURNALIST: OK, Jamie Briggs, thank you. Penny Wong, you stayed on to listen to that, we know you have a meeting you have to dash off to, but is this going to be an issue and is there something the Government can do here?
WONG: Can I first make some general comments because Im always reluctant as a Minister to sort of get into peoples personal financial arrangements and be seen to give advice. It is the case that a range I suppose there was a liquidity crunch, it was difficult for people to get access to money during the Global Financial Crisis and so the Government stepped in to deal with that. For some funds which are based on assets which are difficult to sell for example, mortgages, where it was difficult and perhaps remains to some extent in some markets difficult to get a reasonable price on them various institutions have imposed a slower release of funds rather than winding up the funds all immediately. And what is said is that is to preserve the value of peoples investments. If they simply wound up the funds all at once that they wouldnt get a sufficient price on the underlying assets that they were selling.
JOURNALIST: But this was a particular fund.
WONG: Sure, I am making a general proposition. In relation to this one, obviously I am not aware of all the details. It may be that this does fall into this category where the institution made a judgment about the best way to preserve the value of peoples investments and in their judgment, the best way is to give people periodic payments rather than winding the entire fund up at once because that might mean they get less money for securities that they hold.
JOURNALIST: Even if they are happy to get less?
WONG: Now we do have provisions in place where ASIC hardship provisions and I think a couple of your SMSs refer to this. Where ASIC is, where there is an intent that ASIC regulate this and help people or provide people with a mechanism if there is hardship. Can I give a number here for some of your listeners. I am told that the number to call for ASIC for people who believe they may qualify for hardship assistance is 1300 300 630 1300 300 630.
JOURNALIST: OK, that is a general issue and thats good advice obviously. But we are talking about a major company, Colonial First State, backed by one of the big four banks which is recording again massive profits. Colonial First State in a very healthy state I would have thought. This is just one of their investment vehicles. And they say because of the nature of that they have to eke it out to these people. If the Federal Government intervened to protect these financial institutions and we all understand why now that the Crisis has passed, is it reasonable for investors such as Brian to expect the Federal Government to intervene again? This time on their side of the equation to make sure that the funds are being released as quickly as possible?
WONG: Well first I understand that it is very difficult for investors such as Brian who would like their money back. I think its a question of what are the reasons for the fund not releasing these monies and would people in fact not being better off if they did. We wouldnt want that to occur either. What I am going to do is to ask this is a matter that falls within the Treasury portfolio, and I think Bill Shorten would be the person responsible. So Ill make sure that he is aware that a range of South Australians have raised this issue with your program.
JOURNALIST: OK. Penny Wong, Minister for Finance. Senator Penny Wong, Minister for Finance and Deregulation, thank you for coming into the studio.
WONG: It was really good to be here again.
891 ABC Adelaide with Matthew Abraham and David Bevan - 06/10/2010
06 October 2010