JOURNALIST: Good morning Penny Wong.
WONG: Good morning to you.
JOURNALIST: Now youre saying that youll be needing to find some money because youre getting a lot less money coming into the federal coffers. How much are you short on?
WONG: Because of some of the softness in the short term in the economy from things like the floods, like Cyclone Yasi, as well as the high dollar, which we know has impacted on some firms and obviously consumers being cautious. Because of those factors we are seeing some near term softness and what weve said is were looking at about $4.5 billion less in revenue than we were anticipating in the November update. So in the last five or six months, weve seen a write-down in Government revenue of around $4.5 billion.
JOURNALIST: Im talking to Penny Wong, Federal Minister for Finance. Now Penny Wong, when you break those figures down I think one of the figures is the personal income tax is down by $1 billion and yet we saw the other day that we seem to be getting on top of the unemployment problem, thats actually not a major problem. So why are we seeing less income tax?
WONG: It demonstrates some of the complexities in the economic outlook at the moment. You referred to the unemployment rate Ian, and youre right 4.9 per cent, continued growth in full-time jobs, some 755,000 jobs created since we came to Government. Thats a very good story. But we also know that some of the consequences of the global financial crisis havent finished washing through. An example is the share market and what we are seeing in terms of personal income tax is lower returns to government from capital gains tax than you would have anticipated because of some near term softness, as I said.
JOURNALIST: So the richer are not getting richer, thats what youre saying? So thats why weve lost $1 billion there?
WONG: Well all sorts of people own shares I think Ian. But the point is, weve got this near term challenge but it doesnt mean the long term challenge is any different. Long term we know weve got a very big wave of investment coming. We have to find a way to make space for that in our economy otherwise we know that can lead to risks of inflation. So thats why the Government is very determined to bring the budget back to surplus.
JOURNALIST: Now to do that, youre going to have to take some tough decisions. Any idea which areas youll be focusing on because there was some talk over the weekend about health costs.
WONG: Well I certainly have made the point that as a nation, our health costs are growing. And theyre growing faster than the economy is growing. And that is a situation all governments have to consider. But what Ive said is that it means we have to look at how we make room for those sorts of expenditure rises, how we become more efficient in our health costs. The Government has announced a pathology services agreement which will ensure better value for money for taxpayers.
JOURNALIST: Do you think we are spending too much on pathology? In other words, unnecessary tests?
WONG: Minister Roxon has announced a new agreement which we believe will save in the order of $550 million over the next five years while also delivering the services patients need when they need them.
But look, theres a broader issue here which is we know weve got a very large wave of investment coming. And just some figures that exemplify this: last year mining investment was around $35 billion. This year, its estimated to be around $55 billion. And the estimates for next year are $75 billion. Now we have to make space for that investment. Thats why a surplus is so important.
JOURNALIST: Its interesting though because on one hand, were being told, you know, things are going very well, were getting more investment. And then youre saying weve got about, well even if you took into that health figure of $500 million in savings, youre still $4 billion short. And then you have Tony Abbott saying, well look, if you hadnt spent the best part of $16 billion on school halls and youre going to spend $50 billion on a telecommunications white elephant, he says, and $2.5 billion on roof batts that catch on fire, youd have plenty of money. So is he right?
WONG: Tony Abbott really is no Peter Costello. This is a man who went to the election with a $10.6 billion black hole in his election costings and hes really continued in the same vein.
I just make one point about the many incorrect claims hes made. The $16 billion hes talking about was part of the economic stimulus. Its delivered to 9,500 schools over 3,500 new libraries, nearly 3,600 new halls and was part of the reason why this country came through the global financial crisis far better than most other developed economies.
JOURNALIST: Lets take his other point though. He says if youre borrowing $50 billion to spend on the National Broadband Network I suppose that what he refers to as the telecommunications white elephant if you spend say $45 billion, then you wouldnt have to have a horror budget, would you?
WONG: Well I dont know where he gets that amount of money. The Government equity, thats what the Government is putting into the National Broadband Network, is around $27 billion out over many, many years. And I make the point that the reason the Government is doing that is we know from past experience that the private sector hasnt built the telecommunications network that the nation needs.
But can I just come back to this point. I understand that people will say things are much softer than people are talking about. I understand people are saying the high dollar is hurting this firm, that consumer spending is down, why do we need a tough budget. What Id say to them is this: we know that in the years ahead whether its one or two or three years, that were going to see an expanding private sector in this country that will employ more people, spend more money and use more resources. And we need to make the space for that and not be chasing the same people and the same resources because we know that can push up prices.
JOURNALIST: Im talking to Penny Wong, the Minister for Finance. And Matt the truckie has called in. I think he has an idea of how you can fix things, Penny Wong. Matt.
CALLER: Good morning Minister and good morning Ian. I just wanted to ask a question of why it is that the Government and it doesnt matter which persuasion it is, are always telling us how we need to deal with the consequences of their poor management. Were being asked again in this Budget obviously to take cuts all over the place. And the Government, as Penny Wong just pointed out, is blaming every single event outside of the one that were all obviously looking at which is their poor management of our tax money. And I want to know why it is why that I can run my household money in a deficit with a mortgage and everything else, and I cant look forward and say how much Im guaranteed at getting, before I get it. Why you cant run your deficit over and above to carry us through this period rather than always dumping it back in our laps. You spent and blew $2.5 billion on a batts program, then you put a levy on the flood then you put on a mining tax and now youre going to put on a carbon tax. I mean, are we a never ending tree of money as taxpayers in this country? Or are people going to get serious about the fact that you people spend money as if its growing on trees and it isnt. Thank you very much.
JOURNALIST: Penny Wong?
WONG: Well Matt, Id make the point that in fact real spending growth under this Government, we have a cap that is, a 2 per cent real growth in expenditure. That is just over half of what Peter Costello delivered for his last five budgets.
You talked about the levy and Id just make the point that a levy appeared to be good enough for Tony Abbott to put in place to fund a gun buyback but wasnt good enough to put in place to help Queenslanders. That levy has now passed the Parliament and Id make the point that that flood reconstruction package of $5.6 billion two-thirds of it was in fact funded through spending cuts by government. So only one-third is funded through the levy.
But you talk about economic management and its the right proposition. And what Id say to you is this: the reason we need to bring the budget back to surplus even when there is softness in revenue, which is a result of the near term softness in some parts of the economy, the $4.5 billion less in tax that were going to receive. The reason we need to bring the budget back to surplus is to make sure that we dont have a situation in one or two or three years with the private sector expanding and government chasing the same people or resources because that just pushes up prices. And thats not good for Matt and its not good for Australian households.
JOURNALIST:Well thanks very much for your time this morning Penny Wong, Minister for Finance and Deregulation.
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