JOURNALIST: Senator Penny Wong joins us now. Good morning to you Senator. WONG: Good morning, how are you both? JOURNALIST: Well how are you? Ive just seen you on national television, I think on Sunrise, sitting in an open tent on a - WONG: Its freezing. JOURNALIST: On the lawns of Parliament House in Canberra. WONG: I called it extreme interviewing. Did you see that the light nearly fell on us all too because of the wind? JOURNALIST: Thats gutsy stuff. WONG: Yes, well it was pretty chilly. I feel sorry for the poor old journalists; theyve been out there for hours. JOURNALIST: Oh no dont feel sorry for journalists, no one else does. WONG: (laughs) OK I wont. JOURNALIST: No one else does. JOURNALIST: Senator Penny Wong, Finance Minister and South Australian Labor Party Senator. A very senior player in the Federal Government. And obviously somebody very much involved in framing this budget with Wayne Swan. Its been almost universally dismissed as a budget that talks tough, but isnt really tough. Whats your view? WONG: There are plenty of tough decisions in this budget, some $22 billion of them. And Ive seen a fair few responses from the Opposition criticising those tough decisions. But thats what you need to do to come back to surplus. Its a budget which is a very Labor budget, focused on jobs, on opportunity, on getting more people into work, on training people and on creating jobs. JOURNALIST: There are $21.7 billion worth of savings over four years, is that correct? WONG: Just under $22 billion, thats right. JOURNALIST: Right and thats over four years? WONG: Thats right. JOURNALIST: Is that offset by $18.9 billion in new spending? WONG: No that figures not quite right. The net save position is about five and a bit billion dollars, because the spending includes some spending for which wed already provisioned. Theres a thing called the contingency reserve and spending had already been booked against that. So the net save position is about $5 billion. But I think the - JOURNALIST: That starts to sound less impressive does it not? JOURNALIST: On your figures its five and a bit billion over four years? WONG: Well hang on, the Budget comes back to black. We come back to surplus in 2012-13, as we said we would. We reduce the deficits and we come back to surplus. And we do it not just by savings cuts, but we also do it by a lot of spending restraint. And can I just give you - JOURNALIST: But - WONG: Can I just give you this one figure - JOURNALIST: No well Minister, Minister if we could - WONG: Because this is important, this is an important - JOURNALIST: Just clear this up though -
WONG: Well this is an important figure - JOURNALIST: Minister, well lets work with the figures weve got so far. That is youre making savings over four years of just under $22 billion. You are increasing spending in other areas, so on your figures your net saving is about five and a bit billion over four years? WONG: And the point I was trying to make was that theres also an enormous amount of spending restraint. And the figure I wanted to give you was this one. Over the course of this budget, the average real growth in expenditure over the forward estimates - over the budget period - is about 1 per cent a year. In fact in one year, there is a reduction in spending. You know the last time that sort of restraint was achieved was in the 1980s. Thats the last time. In the 1980s was the last time a Federal Government achieved that sort of spending restraint. So we are coming back to surplus after an enormous hit on revenue from the floods, from the cyclones, from the overhang of the GFC, and of course a very cautious consumer and a high dollar. Weve had to write down revenue by about over $16 billion over the first couple of years that weve been putting this budget together.
JOURNALIST: Now is it correct Penny Wong that of that $5 billion, $5.1 billion over four years, $1.7 billion is going to be spent on the asylum seeker solution? WONG: There is an increase in the management of detention of asylum seekers. Just as this was expensive under the Howard Government, this is also an expense under our Government, and we - JOURNALIST: But over four years, almost half your savings effort - net savings effort, is going to be spent on the asylum solution. WONG: What Ive said is that there are obviously expenses associated with maintaining a system of detention. It is an expensive thing. But its the right policy setting and its - JOURNALIST: So voters who are losing what is allegedly middle-class welfare, to use I think maybe some commentators' view, it almost exactly matches the cuts in so-called middle-class welfare including to kids savings, taking money from kids piggy banks. WONG: Oh come on. JOURNALIST: Almost exactly matches what its going to cost you to fix the asylum problem. WONG: Alright, theres a few things there Id like to respond to. The kids piggy bank thing really, even for you Matt, is a bit over the top. You know what were doing? Were saying the tax break we give low income earners - that is people who are on low incomes, under $30,000 a year - we have increased tax benefits, tax breaks to them so people keep more of every dollar they earn. Its called the Low Income Tax Offset. What were saying is if your parents are wealthy, you dont get access to that for income you havent earned - that is, for income where your parents just allocate that to you as part of the tax return. Were saying in that year, its not fair that a Low Income Tax Offset thats about trying to reward low income people for doing work, that shouldnt be given as a tax break where you havent earned that income or its simply been allocated because your parents are wealthy. So I think the piggy bank thing is a little unfair. When it comes to asylum seekers, this is a policy that costs money, just as it did under John Howard. And we have to make room for that in the budget. Just as, and more importantly - we made room for the mental health package which is a very important initiative, $2.2 billion to deal with a group of people in our society who we know desperately need more services. JOURNALIST: Alright. Now we know youre pushed for time Senator Penny Wong. JOURNALIST: Lets go to Elizabeth from the Hills. Hello Elizabeth. CALLER: Good morning. Im confused because there is a $50 billion deficit this year, $20 billion next year. Is this residual debt? Does that mean that - what I have heard is that there will be a debt of $100 billion by the end of three years. Where does this money come from to pay that debt back? Or are we just paying interest on it? JOURNALIST: Senator Penny Wong? WONG: Well first, in terms of the deficits, the deficit particularly in 2010-11 is entirely as a result of how much money Government receives being massively downgraded.
So when we looked at what Treasury and the Department of Finance thought that Government would receive in terms of tax revenue six months ago, for a whole range of reasons which include the fact that we have a very high dollar and thats having an effect on company profits, weve seen some $16 billion less predicted to come to Government this year and next year. So thats the reason for those deficits. But in terms of debt, can I just give you a bit of a feel for it. Our net debt peaks at about 7.2 per cent of GDP. That is of the size of our economy next year, in 2011-12, 7.2 per cent. The peak net debt for major advanced economies on average peaks at 91 per cent of GDP. So were at 7.2 per cent even at our most - at our highest net debt level. And the average of most major advanced economies is 91 per cent. So you know, were less than one tenth of the peak debt. JOURNALIST: But just to answer Elizabeths questions, do those deficits just go on the debt? WONG: The deficits do have to be funded by Government. JOURNALIST: So shes right. So itll end up what, being $100 odd billion? WONG: Well the Government has what we call a Commonwealth Government Securities Program. And that debt is issued by the Office of - JOURNALIST: Minister, how much is the debt? WONG: The net debt, which is the right assessment peaks at 7.2 per cent of - . JOURNALIST: No, no, no not in a percentage term, but in dollars. WONG: Well the - JOURNALIST: Thats what Elizabeth was asking you. WONG: Net debt would be about $106 billion at its highest next year. JOURNALIST: So shes right. WONG: And what Id say to her - JOURNALIST: It took a long time to say youre right Elizabeth. WONG: But I think its important to get the figures clear, because we can talk a lot about debt and we do, which is why weve made decisions to bring the budget back to surplus by 2012-13. But I think its also important to remember where we are compared to the rest of the world. Were at 7.2 per cent of the size of our economy. Theyre, on average, major advanced economies - 91 per cent. So we are you know, a long way ahead. JOURNALIST: Now Senator Penny Wong, just finally - Finance Minister and South Australian Labor Senator - has the Government of which youre a member, and this includes the Rudd Government, ever met its budget forecasts? WONG: You will remember there was a thing called the global financial crisis. And whilst some people in the Liberal Party like to pretend that didnt happen, I think Australians know it did. And they certainly can see how that affected countries like the UK, countries like the US, other parts of Europe.
How we have been fortunate enough as a nation to come through that well. But that has an enormous effect on our revenues. And no country saw that coming. There would be no minister of finance anywhere in the world that could say to you we saw that coming and we adjusted our budget figures ahead of time.
JOURNALIST: Senator Penny Wong thank you for talking to 891 ABC Adelaide Breakfast.
WONG: Good to speak with you all. ENDS