TAYLOR: Joining us now from Canberra, Senator Wong. Appreciate your time on what is no doubt a busy morning. Joe Hockey says that the Budget is not telling the full story the Government raising the debt ceiling to $300 billion but at the same time delivering a surplus. What do you make of his comment?
WONG: Its good to be with you on the day after the Budget, a Budget where were delivering a surplus on time, as weve committed to. And I think your audience, the international audience, particularly, will know Australias fiscal position is very strong.
If you look at our position, compared to most other major advanced economies, we are well ahead. We are delivering a surplus earlier and our net debt position, even at its peak, is a fraction of the average of the net debt position of the major advanced economies just over one tenth of where theyll be in 2016-2017. So I think its important to get those facts on the table.
In terms of the debt cap, as you would know, we in the Budget are anticipating that we will stay below the current legislative debt cap at the end of each of the financial years. There is, however, potential for significant variability, significant variation and fluctuation within the year. That means theres temporary spikes and dips above and below that debt cap as a result of different bond lines maturing, different payment and revenue timings. And we want to be able to ensure that we have the flexibility to deal with those, at the same time bringing the Budget back to surplus and commencing to pay down debt.
TAYLOR: Ok, you talk about variability. The Budget is predicated on growth estimates of about 3.25 per cent per cent for the 2012-2013 fiscal year to deliver that modest surplus of $1.5 billion. In terms of the growth picture, how much wiggle room is there? Because, if we dont achieve growth of 3.25 per cent, you have to say that that surplus of $1.5 billion would be at risk.
WONG: Theres no doubt that we have been hit, certainly to date, as have all other major advanced economies in terms of our revenue take from the global financial crisis. About $150 billion worth of writedowns over five years as a result of the global financial crisis and its wash out. And thats affected Government revenues.
But Id make a number of points. First, in terms of the surpluses going forward, we have offset that revenue hit. Thats how weve protected the surplus at a time where weve seen revenues being written down. Weve offset that revenue right down to bring the budget back to surplus and to build those surpluses over time.
In terms of the economic forecast Id make this point: our economic forecasts are consistent with those of the Reserve Bank,and broadly consistent with institutions like the IMF with one exception. Were actually more conservative in our forecast around Europe. So the Budget figures are predicated on a more conservative assumption about what is going to occur in terms of the European economies than the International Monetary Fund.
LO: Senator Wong its Bernie Lo in Hong Kong. No doubt a lot of companies that do business in Australia or are thinking about doing business in Australia were somewhat disappointed by the failure of the Federal Government to deliver on that promised corporate tax cut. And this comes at a time when, you know, a lot of neighbours in Asia, but Japan notably, just cut their corporate tax rate... their top marginal rate by three percentage points. How can Australia stay competitive when others are looking to make the landscape and the environment more attractive?
WONG: We want to deliver a company tax cut and I try not to play too many partisan politics on these international programs, but I would make the point, the reason this was not going to pass the Parliament is that the Liberal Party here, the conservative party, was going to vote with the Greens Party to stop it. So we werent going to get it through the Parliament.
We do want to deliver a company tax cut, and one of the things weve done is said to the group that we set up the Business Tax Working Group we want you to work with us to deliver that cut. They proposed a number of potential savings measures in the company tax base that could fund a company tax cut. We have not taken any of those savings. Weve quarantined them, and weve said we want to work with the business community to reform business tax, deliver a company tax cut that is funded and that can be delivered through the Parliament.
You should be aware were also funding some other tax breaks for business in this Budget. Weve included a change to our Loss Carry Back provisions. These are tax measures which are designed to give businesses more flexibility in an economy that is changing.
LO: Okay, finally Senator Wong, the way this particular Budget is structured with the handouts to the people, it is very much a spending plan, a fiscal plan, for the populous. You wouldnt argue with those sceptics who say that it is very much geared toward the election? I mean we had that pretty much that sort of sentiment issued by Mike Smith over at ANZ to Mr Swan.
WONG: Can I put a couple of figures to you? We are taking less in tax than we inherited. So we inherited a tax to GDP ratio of 23.7 per cent. Were well below that for the entirety of the Budget period, well below it. And in terms of spending, if you think about spending as a share of the economy, we stayed below 24 per cent of GDP for the whole of the four years of the Budget period. The last time you had that sort of restraint in expenditure was the 1980s, that sort of consistent level of restraint over a budget period.
We are spending, but we have offset it and more. So were taking less tax, were spending less as a proportion of the economy, weve prioritised. One of the areas weve not taken savings, things like education, doubling the funding for schools, almost doubling it, increased funding for higher education, increased funding for science and research. Thats because we understand theyre the drivers of productivity.
LO: Ill never understand how you do it, Senator Wong. You can never please anybody, and people are lobbing projectiles from all parts at you, no matter what you do. Its always great talking to you. Okay, have a fun day today with the media.
WONG: Thanks a lot.
LO: Senator Penny Wong, Australian Minister for Finance and Deregulation.
ENDS