MORRISON: Minister, great to have you with us today. Thank you so much for joining us.
WONG: Its really good to be here again.
MORRISON: Im sure that youve already been speaking about them, but there arent really many business leaders out here in Australia who are saying, you know, dont worry so much about the surplus, that is really a political issue, an election issue. Rather, get the economy going, we dont need austerity at this point in time. What would you say to them?
WONG: What Id say is you have to run the right budget policy, the right fiscal policy, for your economic circumstances. And the economic circumstances Australia faces is an economy growing around trend, low unemployment, and a very, very big pipeline of investment. And in those circumstances its appropriate for fiscal policy to step back and to give room for monetary policy to do more work, which is why we put forward a mid-year update which retains surpluses across the budget period. Obviously, that has been harder because of whats happened in the global economy.
MORRISON: Let me ask you about these spending cuts, because as I mentioned, there is concern from the business part of the economy of Australia there is a sense that they are in fact going to continue to slow, or theyre going to hurt, economic growth. You know, even in a minor way they will still impact economic growth. And one of the criticisms thats been levelled at the Budget today involves the timing changes when it comes to taxes for corporates here in Australia. This is not going to happen all at once in 2012-13 the estimate is $5.5 billion in revenue these timing changes will bring. But, theyre saying that this is going to impact the liquidity of corporate Australia, and essentially is going to impact the way corporates run their enterprise and will impact employment. What would you say to that?
WONG: A couple of points about the company tax change, where were moving to monthlypayments. Theres a very lengthy period of discussion and consultation before that actually commences. So it doesnt affect the first year that we come back to surplus. Were looking at 2014 for the commencement date. So obviously therell be an appropriate level of consultation about the implementation of that. I would make the point that companies arent being asked to pay more tax. We think this is a sensible change to line up corporate tax payments with, for example, our GST payments which are also monthly. So we think theres a sensible change. And as you know there are a number of nations around the world which have already moved to monthly remittance.
LO: Minister its Bernie Lo in Hong Kong. Do you not worry though that some of these measures, some of these tweaks and changes, and theres another provision in here for $445 million in revenue enhancement by removing some in-house fringe benefits tax arrangements. That coupled with increases on higher fees for visitation and work visas in Australia. Dont you fear that that will make the country even less competitive and make private enterprise less willing to commit to creating jobs?
WONG: I think a sensible fiscal policy is important to ensuring all of those things do happen. That is jobs are created, that you continue to grow and that you continue to be an attractive destination for investment and for tourists. So I think the right fiscal policy for the times is a surplus strategy which is what weve got in place.
In terms of the tax point youd make, I will make this point: we are a much lower taxing government than the Government that preceded us. In fact if we were at a tax to GDP ratio that we inherited when we came to government we would have substantially higher surpluses in this year and over the forward estimates because the tax take as a share of GDP was simply larger. So we are at much lower levels by historic standards than previous governments.
LO: Minister, the last time there was a big argument over an overhaul or a revamp of the tax system in Australia was the very, very controversial MRRT. But you look at where we are right now; lower commodity prices across the board, iron ore prices are down fifteen per cent, coal is down, thermal coal is down nine per cent, coking coal thirty per cent. And you know the take from the controversial mining tax, basically its going to bring in considerably less than originally thought. Is this mid-year budget update by the Treasurer is this not an admission that the timing of the whole concept of the MRRT was misguided?
WONG: No, not at all. I think this is a tax for the long term as well as the short term, and it is sensible as you know. Resource rent taxes or profit based taxes are a much better tax design than volume based taxes, which is what royalties are. Theyre much more efficient and much better for the community and theyre much better for business. They are however volatile because they obviously depend on, in particular, whats happening to commodity prices. And youre right, weve seen a lot of downward movement in commodity prices. Certainly, whilst we factored in a decline since our Budget, the decline has been greater than we had anticipated. And Id venture to say and I dont know what your predictions were Bernie but Id venture to say they were probably sharper declines in commodity prices than a lot of people had predicted. Obviously our budgets been affected by that as have many other economies.
MORRISON: Penny weve got ten seconds here. What do you reckon it means for interest rates?
WONG: We want to give the Reserve Bank more room to move, thats the idea of this sort of fiscal policy.
MORRISON: Alright, Minister great to have you with us today. We really do appreciate your time. Thank you so much for chatting to us today.
WONG: Nice to speak with you both.
ENDS