CLARKE: Senator Wong, thanks for joining us.
WONG: Good to be with you.
CLARKE: Revenue is currently about $7 billion down on what you anticipated it would be at this point in the financial year is that trend going to continue? Are we likely to see another $2 or $3 billion down by the time we get to the end of the financial year?
WONG: Unfortunately, we don't anticipate this trend to be shifting any time soon. Let's understand what's happening at the moment: we've got a high dollar; the prices of the things Australia is selling to the rest of the world have fallen. Those things combined means that business are making less profits and when you get less profit from business you get less money in tax to government.
So, for the 2012-13 year, what we've seen ... you will recall at October we'd already written down by about $20 billion for this year alone [from 2010-11 Budget] ... since [MYEFO] we've already seen another seven and a bit billion dollars written down. Now, that's the circumstance in which we're putting the Budget together.
We have to make a choice as a Government as to how we respond to that, and we've made very clear we will put jobs and growth first. We won't chase revenue down, but we will make responsible savings decisions to make room for wise investments in the country's future.
CLARKE: So, if we're talking $27 billion less now where we are than where we thought we were at the [2010-11] Budget, that's a fairly significant misforecast or miscalibration of where things would be, particularly if we're talking about it being things like commodity prices and the higher dollar which I would've thought would be an area where forecasting is pretty close or at least tighter...
WONG: I would make the point that if you look even at the market economists I don't think anybody anticipated nominal GDP to be where it is. The reality is we have to deal with this problem and it's a problem or a challenge that will confront us not only in this year but through the years of the forward estimates. So, the question is, how do you deal with it? You don't deal with it by cutting to the bone because that's not good for jobs. It's not good for the economy. And you don't do it by cutting the wrong things. The problem with Tony Abbott is he wants to cut the wrong things. Lets put the
CLARKE: Let's look at government's approach. Youre saying
WONG: No I'm talking about the difference. I mean, we're saying let's cut the private health insurance rebate to millionaires. Tony Abbott says no we dont want to do that but we do want to cut the tax break to all low income earners in Australia. Now, they are the wrong priorities.
CLARKE: You talk about letting the automatic stabilisers work at this point; that it's not the right time to make big cuts because of the impact that would have on jobs. The Grattan Institute and other economists agree that there is a big structural challenge that needs to be addressed. They say that the economic conditions right now and as the Government has said are quite good. We have economic growth; we have low unemployment relative to the rest of the world; interest rates are in a favourable position; theres low inflation. This is something the Government has trumpeted. If we have this positive suite of economic figures and stats at the moment, if now is not a good time to make major structural changes, when will be?
WONG: We will make responsible savings decisions. We will make structural savings decisions. The Prime Minister has made that clear. But there is a difference between making responsible decisions around savings in order to find the room for wise investments for the future, and simply cutting to the bone. The government has a very strong record in terms of structural savings for the budget I have to say, many of them have been opposed by the Opposition.
As the Prime Minister said when she spoke about the school reforms, she said, look, we're going to have make structural savings decisions to fund this, but that's about making sure you get your priorities right. A wise investment for the future that is going to mean a savings decision. They won't be popular. I mean, witness the universities decision, that wasn't popular.
CLARKE: It certainly wasn't and some of the super changes as well have had a mixed reception. But, if we're talking more of those sorts of structural changes, which are difficult and hard to prosecute publicly, that's just to fund the NDIS and the Gonski reforms. If you're going to have to go further than that to make broader structural changes, is that the scale of the sort of structural change we're going to see at this Budget? Does it need to start being done now?
WONG: The Government has to get the balance right. This is what governments all over the world are struggling with. We're privileged in Australia to be in a much better position than many of the other advanced economies who are struggling with the same question. How do you manage your budget in a circumstance where you see government getting less money?
Well, what you don't do is cut so hard that you stall the economy and you risk jobs. What you have to do is make the right savings decisions and you also have to say, look, even though it's difficult we have got to make the right investments for the future.
The school reforms that we are talking about I think it's extraordinary that there is a view out there, certainly held by the Opposition, that we have the luxury of not doing anything. We don't. There are too many Australian children being left behind. We are less competitive in our region and globally because of where our schooling system is at. It is not fair and it is not good for the future for to us maintain the current school system. So, we have to make that investment. I think that's an imperative. To do that we're going to have to make difficult decisions.
CLARKE: And are they going to be in areas like health and education and welfare, which are the biggest and defence and infrastructure which are the biggest areas of government expenditure?
WONG: Well, I think that's a question about the Budget and I'm happy to come on after the Budget and talk about where the savings have been made to find the room for these investments.
CLARKE: The Government's already outlined what changes it will make in the area of superannuation. There was a lot of question and speculation about what changes might be there and the Government was happy to rule in some changes. Bill Shorten is now ruling out further changes. So, the Government is prepared to talk about the areas it's looking at targeting pre-Budget time.
WONG: We made an announcement on our policy on superannuation. But my point is that on Budget night we will make clear our choices. I have to say, I don't think Tony Abbott will make clear his, and given that he is behaving as if he is the next Prime Minister, I think it's time he probably told Australians what choices he would impose on them.
CLARKE: In looking at the long-term revenue position of the Government, in recent times we've seen some level of mining investment begin to scale back the Browse project obviously was a major example of that. Is that the sort of thing that your Department is beginning to factor in in forecasts beyond the forward estimates?
WONG: We've been anticipating that the peak of the mining boom would plateau in the near future for some time certainly the Reserve Bank has said that. And this comes back to where we started. You have to think about the Budget being sustainable in the years and decades ahead. You have to recognise what's happening in our economy, what's happening in terms of the dollar, what's happening in terms of the mining boom.
We're going to see the peak of the investment boom come towards us. There will be a big boost in production and volume, so that's a good thing for the economy. But you have to plan, recognising these changes in the economy in the years ahead.
CLARKE: And, similarly with the growth in China, does the Finance Department anticipate that we will see China's economic growth continue to grow in the future, in terms of the rate of growth? Or are these more modest growth figures and I say modest talking 7 per cent and 8 per cent, but in the context of China is that now the new normal for China's economic growth?
WONG: I make the point that the Chinese economy is still growing at a very fast clip, certainly compared to advanced economies. I'd also make the point it's growing off a bigger base. So China is continuing to grow.
Obviously, what the Government does will be clear in the Budget. And we look at the global economy and we consider what will happen in the global economy, make forecasts around those and often they're very similar to what you see from the IMF.
CLARKE: We'll certainly see more details when we get the Budget in couple of weeks. Penny Wong, thank you.
WONG: Good to speak with you.
ENDS