HENSCHKE: Penny Wong, the Finance Minister, has been out and about today. I spoke to her earlier and I started by asking her about the Baby Bonus, and this is how our discussion began.
WONG: This is one of the savings weve made to make room in the Budget for a very big reform, which is the investment in schools. I appreciate that no savings measure is something that is warmly welcomed, but if you have to make room in a Budget, particularly where youve got a lot less tax money coming to Government than you anticipated, you have to make some savings across the Budget and this is one weve made.
People will still get, for Family Tax Benefit Part A recipients, theyll still get $2000 for the first child and $1000 thereafter for subsequent children so theres still a contribution. But we have abolished the Baby Bonus because we think the greater priority is to find the resources for our schools reform. Lets remember also, this is in the context of the Government having introduced Paid Parental Leave and other measures for families, like increasing the Child Care Rebate from 30 per cent to 50 per cent.
HENSCHKE: But if you think about the ... I suppose it was the catch-cry of Labor, working families, couldnt you have kept the Baby Bonus for people that were really struggling and said, look, well get rid of the middle-class welfare but well still help those people that are on very low incomes. And this has been an attention by a lot of people in recent times saying thats where you have to focus if you do want the Gonski and all these other things to work, youve got to help people on very low incomes.
WONG: And the Governments doing that. Lets just go through the things weve done: weve tripled the tax free threshold that takes a million people out of the tax system, but more importantly gives everyone earning up to $80,000 a tax cut, something that Tony Abbott one of the few things hes committed to is to take that away. Were improving the tax breaks on superannuation for low income earners. As I said, weve introduced Paid Parental Leave, weve increased the Child Care Rebate, and weve put in place a SchoolKids Bonus. So, these are all things which are about low and middle income families and theyre very important reforms.
I understand that there are people who would have preferred the Baby Bonus to be retained, and what Id say to them is, look, weve got a school system at the moment that leaves too many Australian children behind. If we want a school system that ensures that that doesnt happen, and if we want the country to be a smarter nation and a nation that can compete in the Asian Century, then we need to invest in our schools and we have to find the space to do that.
HENSCHKE: Lets just have a look at some of the big infrastructure spends: fixing up a section of South Road is going to cost billions. Is that something that we can really afford to do if, as we say, were living in such tough times in terms of income streams to the Government?
WONG: Well, budgets are all about priorities and really there are three key priorities in this Budget. One is schools, the second is DisabilityCare the next wave of Medicare, the next stage of it, and the third is infrastructure. And one of the infrastructure projects that youre talking about is the South Road upgrade between Torrens Road and the River Torrens.
The reason that investing in infrastructure is important is that it yields economic benefits to the state and the nation in the years ahead. So, you fund now, but you get benefits for firms, for commuters, for transporters through the economy, not just for one or two days but for years, and thats why infrastructure is such an important part of making sure you build a stronger economy.
And, anyway, if youve driven along that section of South Road, we all know its certainly in need of an upgrade and what this will do is make sure youre linked with the Superway and you get real benefits for the state through those projects.
HENSCHKE: Looking ahead, theres been some concern that because of a drop in GST, South Australia will get a drop in general terms in the amount of money that it will get from the Federal Government in the years ahead. Well have a State Budget coming up. How tough will it be for South Australia in terms of the amount of GST revenue that it will get in the months ahead and the years ahead?
WONG: Well, certainly not as tough as it would be if Tony Abbott were elected and he implements the deal that Colin Barnett has agreed with the big Coalition states, to reform the GST to move to a per capita arrangement. I mean, the risk there of those arrangements is that if you change existing distribution, South Australia stands to lose up to a billion dollars.
Now, obviously the current arrangements, we dont direct them theyre done according to a formula which looks at comparable services across the country. What I can say to you is, in terms of two areas of spending, weve increased spending in South Australia. One is infrastructure, which weve been speaking about, where the per person investment for South Australia has almost tripled since weve been in Government, to just over $270 dollars per South Australian. We also have increased funding for health and in this Budget there will be $1.2 billion in funding for South Australia in our health system, so theyre important investments.
HENSCHKE: Penny Wong, the big criticism that people have of the Labor Government at the moment is that we have a Treasurer who was standing there a few years ago saying, look, were going to be in surplus, its all going very well, and now we are being told the global financial crisis yet again. Now, we know that when people see something like the biggest global financial crisis the world has seen since the Great Depression, that youd probably would adjust your numbers it didnt actually look at the worst case scenario and therefore its been caught with a very dodgy set of numbers ...
WONG: I know the Opposition are saying that, but I dont think thats accurate. I accept that people will say, well, you thought you could come back to surplus and now youre not. You need to explain that to us. And I also accept that well take some political criticism for that. But we knew at the end of last year that, whilst we had adjusted our numbers as you said, and whilst we had assumed less tax money to Government than previously, what we were seeing was a far bigger hit on tax to Government than we had anticipated and the write-down
HENSCHKE: But just Penny Wong, you know youre in there in the discussions as well as the Finance Minister. Did you at any stage say look, I think your forecasts are too optimistic. I think we should be winding this back.
WONG: What Im saying to you, Ian, is we did. And if you look at the last Budget and the Mid-Year Review, we actually did adjust downwards how much tax money we thought wed get. But the amount that weve had to adjust, even in the last six months ... this is the second largest since the Great Depression. Now
HENSCHKE: So what about the future then? If its that bad now why will it be any better and why are we predicting a surplus in a couple of years ahead. If the past predicts the future, arent we just in for tougher times?
WONG: Its a very good question and the answer is, well, you have to adjust to the economic circumstances. You need to make a decision about how you respond to them and the Governments made two really important decisions. The first is, in the near term, weve said were not going to chase revenue down and keep cutting because that will mean that we would have a problem when it comes to unemployment, it would impact jobs and it would impact economic growth and thats bad for the country.
But the other thing you have to do is adjust to the new reality. Youve got to take responsible savings like the ones weve been talking about, the Baby Bonus, and find the room for the right investments for the future and thats what weve done. And weve set out our pathway to surplus and I appreciate you may criticise it. But I would make the point that overnight the ratings agencies have reaffirmed our AAA credit rating all three of them and that really does demonstrate what the markets think of the Governments Budget, that it is credible and that weve made the right decisions for the future.
HENSCHKE: Alright, well, thank you very much for your time this morning. Finance Minister, Penny Wong.
WONG: Good to speak with you.
ENDS