TRIOLI: Penny Wong, good morning and thanks for joining us.
WONG: Good morning Virginia. Good to have you back.
TRIOLI: Thank you very much its nice to be here. Dont know if you can say the same though, because youre about to dump major spending pledges, are you?
WONG: What I can confirm is that we are facing a very significant revenue shortfall from what was anticipated, and certainly in the current financial year. If you look at what was expected at Budget until now, were going to be receiving as a government about $17 billion less. And we do anticipate that we will see revenues hit across the forward estimates.
So, in that context, given the challenges the budget faces and the nation faces, the Government has to take responsible decisions. So, we have indicated today that we wont be proceeding with the additional boost to family tax benefits that was planned for later this year. Thats a regrettable decision but one that is responsible in the economic circumstances.
TRIOLI: Why are you announcing it today? Why not Budget night?
WONG: Im confirming it today Virginia, and the reality is we said last week that we did have to have a conversation with the Australian people about some of the difficult decisions we have to make and the circumstances and challenges the nation faces, and were having that conversation.
TRIOLI: How did you get this so wildly wrong? You had so many organisations pointing out to you for so long and, to be fair, to the Treasurer, Wayne Swan, as he came on this program and others and over and over again said that over his dead body they would be a deficit. You had business groups. You had, to be fair, the Opposition. You had economists saying that it was probably looking like it was going to be a deficit and that would be no bad thing. And yet you guys stuck to your guns. Why did you do it?
WONG: Well, the Opposition has also changed their position
TRIOLI: Lets leave them out of it for just one moment and lets get to that specific question. Whyd you stick to it?
WONG: Well, you raised the Opposition in your question, and Im happy to answer the question. But Im making the point that the Opposition previously was promising much bigger surpluses and now, as Michael I think said in the introduction, theyve also had to deal with the economic reality. We
TRIOLI: But getting back to the question...
WONG: We are facing quite unusual circumstances and I dont think its correct to say that this was anticipated. What were seeing is the dollar remaining stubbornly high but the terms of trade that is, the prices that Australia gets for the things it sells to the rest of the world are falling. Now, economic orthodoxy would have that situation meaning the dollar would fall and that hasnt happened. And so what has occurred, and youll see it in business profits, is that that set of circumstances has really hit business profitability. And were seeing, therefore, a very significant reduction in anticipated revenue for government.
So those circumstances meant in December last year, the Treasurer said, look, the economic circumstances are such were not going to be able to hold to our previous strategy. What we will do is make sure we make responsible decisions such as the one Im confirming today.
TRIOLI: So how many people miss out then on the promise that you made to them when it came to the modifications of Family Tax Benefit Part A? How many people? And are you expecting that those people will still front up and vote for you in September?
WONG: Well, I would make a couple of points Virginia about that. Nobody as a result of this decision is going to receive less than they are receiving now. What were saying is that the people who were going to get an additional boost to the Family Tax Benefit wont get that boost in July. So I think its wrong to characterise people as losing out from what theyre getting now as a result of this decision...
TRIOLI: Losing out from a promise. Lets not play ducks and drakes here.
WONG: Well, Im completely confirming that. Im just saying that lets understand whats occurring. And look, this Government I think has really made a priority of assisting families.
The SchoolKids Bonus, the changes to the tax free threshold which are particularly good for second income earners many of whom are women. Those are very important reforms for families and those will remain.
What we do face is a difficult set of Budget circumstances, which the Opposition also faces. And, look, there is a very stark contrast between this interview and any interview youll have with Joe Hockey is we will, today and on Budget Day, outline the responsible savings that we will make. Joe Hockey is saying weve got to end the age of universal entitlement but he wont tell Australians what cuts he would make. I think thats simply dishonest. Hes saying were going to cut to the bone but we wont tell you before the election.
TRIOLI: Well get to what the Opposition wants to do and we have when we spoke to Joe Hockey about that last week
WONG: ... And did he tell you what hed cut?
TRIOLI: I guess youre taking the advice that Peter Costello gave the other day where he said the easiest cut to make is the one that you havent already given.
WONG: Well, one thing I would say about Peter Costello is Joe Hockey and Tony Abbott are nothing like Peter Costello. At least he did tell people what he was going to do and this set of Coalition politicians is saying well cut to the bone but were not going to tell you before the election what were going to do.
TRIOLI: Are you considering a change to the mining tax?
WONG: The mining tax has passed the Parliament and I would say, if you look at the revenue write downs that were talking about, for all the criticism that people want to make about the mining tax, you can see that this challenge is not driven by the mining tax. This is a much broader based problem and challenge than that. When youre talking a $17 billion write down in 12-13 thats clearly and demonstrably not driven by the mining tax.
TRIOLI: Do you think the Parliamentary Budget Offices estimate of the mining tax raising only $800 million this financial year is accurate or do you think it will be even less than that? Is it a possibility that we could see even less than that rather small amount?
WONG: Well, certainly the mining tax is a profit based tax and for the reasons Ive outlined earlier all profit-based taxes are being hit hard. But Id again emphasis the challenge for revenue in this financial year and across the budget period is not a mining tax-driven problem this is a much broader challenge than that, where profits across the board are being hit because of the high dollar and because of the terms of trade. So I think its wrong for people to say everything would be fine if we changed the mining tax. Thats simply an inaccurate assessment of the challenge the nation faces.
TRIOLI: Well, then, can I interpret from what youre saying there, Penny Wong, that it is possible that the figure could be lower then than the $800 million given that all profit-based taxes are subject to the changes and the winds of fortune that youre talking about?
WONG: I dont know that you can infer that. I think you can infer that profit-based taxes across the board are likely to see a hit because of the circumstances Ive outlined
TRIOLI: ... Well thats one of them, that is a profit based tax
WONG: ... and I was about to go on to say, Virginia, and the mining tax is a profit based tax.
TRIOLI: Well Im going to infer it then and well see if Im wrong. Lets take it from the other side then your revenue hole of $12 billion is barely 10 per cent of the $112 billion the Government gives away in tax breaks. So finding that amount of money is clearly possible. Why not do it?
WONG: Well the figure that I was using is $17 billion between Budget and Budget. And Im not sure which tax breaks youre referring to, but the Government obviously has to make responsible decisions and it also has to make economically sensible decisions.
TRIOLI: Well if we just stuck with superannuation tax breaks I think that pretty much just eliminates that whole $12 billion in one fell swoop.
WONG: And weve announced our superannuation package, Virginia, and it did involve introducing some taxation measures. Theres obviously a public policy benefit in superannuation which is a Labor policy and one that were continuing to build on particularly for low income earners, where were introducing a tax break for low income earners that Tony Abbott has promised to take away. He wants a tax hike on every low income earner in Australia.
TRIOLI: How concerned are you at the moment about the Governments credibility going into this election campaign period now? Having to have made the many announcements you have about the state of the budget and the state of the deficit. Do you have any doubt now about your credibility in the voters eyes?
WONG: I think credibility comes from doing the right thing. We are doing the right thing in this Budget, and we are doing it in an election year. And its a tough circumstance in which to be doing it. Its difficult in an election year for me to come on this show and say to you, yes were not going to proceed with the boost to the Family Tax Benefit that we wanted to. But you have to make the responsible decisions for the long-term because ultimately thats where economic growth and jobs for Australians comes from if the Government gets the economic settings right to enable that to happen.
TRIOLI: Are you concerned about renewed signs of weakness in the economy? ACCI is talking about poor forward orders and weak investment at the moment do you share those concerns?
WONG: I think were very conscious about the pressures on business as a result of a very high Australian dollar. We shouldnt underestimate the effect of that. I mean thats had a very large impact on businesses and on company profits.
And one part of that is whats happening to the Governments budget. Its a challenge for the nation and its not going to be resolved by slogans or by Joe Hockey trumpeting the end of the age of entitlement. Its going to be resolved by sensible, responsible decisions and wise investments in the future and thats the approach the Government is taking.
TRIOLI: Penny Wong, good to talk to you this morning. Thanks so much for joining us.
WONG: Good to speak with you again Virginia.
ENDS