JOURNALIST: Minister thanks for joining us today, great to have you on board. What can you tell us about this announcement, ahead of the big detail coming out on Sunday?
WONG: This is a policy that weve been working on for some time. In fact it was a policy that the former Prime Minister John Howard took to the election in 2007. And very simply, its to put a price on carbon. Because we know that unless you put that price signal into your economy, it will be more expensive to reduce emissions, to reduce pollution, and you wont get the same price incentive for firms to invest in clean energy and in lower polluting ways of doing business.
So the Prime Minister will be announcing details of the Governments package this Sunday. And we look forward to continuing the debate here in Australia. Its obviously a tough debate, but its the important thing for the countrys future.
JOURNALIST: Minister, word on the street is that the carbon price will be about $23 a tonne. Is this in the ballpark?
WONG: Obviously on issues such as that Ill have to wait for the Prime Ministers announcement. What we have been focused on is understanding that this is a very important economic reform.
Its not just an environmental reform; it is about transforming the economy. And that means you have to look at the nature of the market mechanism, the nature of the price signal, and what transitional arrangements you need to put in place to support industry, as well as households, through this transition. So theyve been the priorities as the Government has put its package together.
JOURNALIST: Minister, lets take a look at the other side of the argument. Your conservative opposition down under are calling the carbon tax reckless, also economically dangerous. Your own Treasury previous modelling at least suggests at $23 a tonne its going to jack up electricity rates by anywhere from 10 to 15 percent. How is that going to be offset? How are consumers going to bear this? Its also likely to jack up food costs by about 1 percent.
WONG: Theres obviously a price impact when you ask polluters to pay for something thats currently free. And that is pollution. If you want to try to reduce it, you have to put a price on it. Its sensible economics.
The benefit of the sort of approach that the Government is taking is that you can use the revenue raised from imposing that price on polluting firms to put back into the economy, by giving households assistance to deal with any price impacts. Were a Labor Government, were very conscious of the importance of helping Australian households with those price impacts. Thats been a priority as weve put this policy together.
JOURNALIST: But exactly how are you going to help households mitigate the effects of higher utility charges?
WONG: What weve said publicly is that nine out of ten households will receive some assistance, and well provide assistance through a mix of increases in government payments, or tax cuts, or a combination of both. And these details will be announced on Sunday.
Youve referenced the Opposition in your earlier question, Martin. Regrettably, here in Australia we had a bipartisan consensus around these issues until about 2009. We certainly had, and still have, a consensus among economists about the cheapest way, the lowest cost way to go about this transition. Unfortunately, this has turned into a political and partisan issue.
But, the Government is very focused on ensuring we put this in place, we do it sensibly, and we start the transition so we can make sure we turn the economy towards a much cleaner energy future.
JOURNALIST: One of your newspapers over in Melbourne, The Age, reported just a couple of days ago, I think it was yesterday, that this plan initially was supposed to be revenue neutral but now the costs of it, most of it is going to be down to actually implementing it. Its going to cost your government $4 billion over the next four years. Thats going to be a big debt in your accounts. How do you make up for that?
WONG: I want to make very clear the implementation of this package will be consistent with the Governments fiscal strategy and as you know, the fiscal strategy is for a very rapid fiscal consolidation to ensure we do come back to surplus by 2012-13.
As you know, weve got very strong public finances here in Australia. We have very low levels of net debt compared with most advanced economies and we intend to continue to ensure our public finances are very strong, regardless of what other matters the Government also has to implement.
JOURNALIST: Minister, weve spoken to a number of resource analysts about putting a price on carbon and this is a relatively new concept for a market to digest. One of the key concerns is that we operate in a global environment and once carbon pricing starts to move, it could prove volatile which makes your task of controlling prices and impact on the economy a lot more difficult. What happens if carbon pricing down the track is not $23 a tonne or whatever number you set on it, and its a lot higher?
WONG: Can I say first, that the first part of your question, you suggest that this is a relatively new concept. Im not sure that I agree with that. Certainly, as you know, Europe has had a price in carbon for some time. Other countries impose regulatory mechanisms that obviously of themselves impose an implicit price.
We in Australia have been talking about doing this for nearly half a decade. As I said former Prime Minister Howard in 2006, commissioned a report on this, went to the 2007 election with a policy very similar to what the Government is proposing to introduce.
So, this has been on the cards for some time. But Id also note that despite that, we have a very strong pipeline of investment, particularly in the resources sector. Some $430 billion has been estimated in that pipeline, by our ABARE, we call it the Australian Bureau of Agricultural and Resource Economics so that does indicate, peoples confidence, I think, in the Australian economy and the outlook.
In terms of price volatility, that is something you have to look at as you put your policy together. And what weve announced previously, is that we anticipate a period of a fixed price. And that does give the market very clear certainty. The fixed price period would occur for a period of time until we transition to a floating price.
JOURNALIST: That is a starting point indeed Minister, thank you for explaining it to us. Penny Wong, Australias Finance and Deregulation Minister.
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