RN Breakfast with Fran Kelly - 17/07/2013

17 July 2013

KELLY: Penny Wong is the Finance Minister and Leader of the Government in the Senate. She joins us from Melbourne Airport this morning. Minister, thanks very much for your time.
WONG: No worries, good to be with you.
KELLY: This early move to an ETS is being sold by the Government as reducing the burden on the household budget. Is that a concession the carbon tax was hurting families?
WONG: No, its a recognition that if we move to a market mechanism with a floating price its going to reduce the cost of acting on climate change to Australian households, and to the economy. So thats a good thing.
KELLY: But the Governments spent the last couple of years saying the carbon tax is not a burden, its not actually hurting families, and all this talk that it is from Tony Abbott, is an exaggeration.
WONG: Theres no doubt Tony Abbott has been exaggerating the impact of a price on carbon something he used to support, people seem to forget that in an attempt to whip up a fear campaign.
But the reality is, as you know Fran a floating price and the market, we believe is the most efficient mechanism to reduce carbon emissions and what weve announced is bringing forward that emissions trading scheme.
KELLY: The Governments own modelling though indicates that the introduction of a carbon tax would lead to only a modest increase in electricity prices of $3.30 a week. So thats what weve been living on the understanding of, and yet now the Prime Minister is telling us by scrapping it, households are going to save $380.
WONG: It is the case that the carbon price has had a much more modest impact on inflation and on prices than Tony Abbott would have you think. And as you know, were still creating jobs and the economy is still going, so it hasnt been the wrecking ball that hes stated. But if you can reduce Australias contribution to climate change, if you can reduce our carbon pollution at a lower cost to households and the economy, thats a good thing. Thats what were doing. Were obviously also keeping the household assistance
KELLY: And why would you be doing that given that households wont be paying as much?
WONG: Well, a couple of reasons. Lets remember who this assistance goes to. Were talking about pensioners, were talking about people on family tax benefits, people on the Newstart Allowance and so forth. So, a lot of people on fixed incomes and low and middle income Australia. I dont think its a bad thing to continue to assist them.
KELLY: But its just extra money in their pocket. Youre saying that their bills will be cut back so they wont need that compensation anymore; this is just money for jam.
WONG: What Id say to you as a Labor person is I dont mind pensioners having a little bit more in their pocket. Were not talking about people who are earning vast amounts of money. Were talking, often, about people on low and often fixed incomes. So I think thats a small contribution we can continue to make as a Government to cost of living pressures for those Australians, and is a good thing.
KELLY: These are tough budgetary times though; its starting to sound very much like an election sweetener.
WONG: Well, at the same time weve made some savings in the budget for which weve been criticised by some groups. So I dont think you can say the Government hasnt made difficult decisions in order to ensure we comply with the fiscal strategy, to make sure we offset the impact of a lower price on the federal budget. Weve done that. And, that said, as the Finance Minister I can tell you theres no such thing as an easy save. But its the right thing to do as you know, youve got to keep your public finances strong.
KELLY: Promising to ease the cost of living burden by winding back the cost of the electricity and gas bills if the carbon tax goes how can you guarantee that? What if the generators and the retailers dont pass on the cut?
WONG: We do have markets in electricity which are either competitive or regulated. So in a competitive market, obviously, its pretty difficult to price gouge. People are going to have to pass on the lower carbon price, and in the regulated market that can obviously be taken into account by the regulator.
KELLY: Now we should be clear here: all claims of terminating the carbon tax, and thats quoting the Prime Minister from yesterday, are aspirational arent they? This is nothing more than an election promise.
WONG: Well, I think there are two options for the Government. We can either if the election is after the recall of the Parliament we can seek to put it though then or if we go to an election and this is the policy and, obviously if the Government is returned, we can seek to legislate it then. I mean if its aspirational then what youre assuming is that Christine Milne will yet again vote with Tony Abbott
KELLY: Well she said she would vote against this
WONG: My view is the Greens have got to start to be held responsible for their destructive impact on climate policy over these last years. I mean, we would have had a floating price had she, and others, not voted with Tony Abbott and extraordinarily Steve Fielding, who didnt believe climate change was real in 2009 against a carbon price. Now, are the Greens party really going to continue to make a contribution that is that negative to climate policy?
KELLY: Well, youve got to deal with the Senate that is there and at the moment the Greens are saying they would vote against it. So that means even if Labor did win government, the legislation for this move to an ETS wouldnt come in on 1 July next year because the current Senate, according to the Coalition and the Greens at the moment, wouldnt pass it so that starting date is false.
WONG: Again, what Id say to you is this: a week is a long time in politics and the electorate can have a view about these things. Weve put a policy out there which I think makes both environmental and economic sense. You can reduce emissions, you can make sure Australia contributes to the fight against climate change but you can do it at lower cost to the economy.
So, essentially what the Greens would be saying is, we actually want to impose higher costs than required on Australians in order to meet our targets. I dont think thats a sensible position. And in terms of the Coalition, we know on this issue they are simply completely negative.
KELLY: Maybe, but 1 July 2014 thats the date the Prime Minister is promising to bring in an emissions trading scheme and he cant make that promise given everything, every utterance, made by every other player in the parliament.
WONG: We can make a commitment about our policy position and we can make a commitment about what we will campaign for. And the reason we need to do that is business do deserve the certainty of what the Governments position is. And I think
KELLY: Well, if its the certainty youre after then wouldnt it be better for the government of the day to recall Parliament before an election and have an attempt at getting this through?
WONG: If the Prime Minister chooses to do that, thats certainly something we will do
KELLY: That would be putting your money where your mouth is though, wouldnt it?
WONG: Well I think our money where our mouth is, is making clear what our position is. Whether its before or after an election, this is what the Labor Party and, if returned, a Labor Government would do and we will advocate very strongly for that against the really destructive politics of both the Greens and the Coalition on this issue.
KELLY: Were talking to Finance Minister Penny Wong about Kevin Rudds promise to move to an ETS earlier and the incentives that go with it. Minister, the effective price for emissions-intensive trade-exposed industries, under the change will fall from $2 a tonne to 50 cents a tonne; thats Government figures. Wheres the price signal to heavy industry to lower emissions at that price?
WONG: Lets remember the sectors youre talking about are what we call emissions-intensive trade-exposed so these are not just high emitters, theyre also firms who work in markets where they cant pass the price on because they are trading in global markets. We do have a process of reducing that assistance over time; I think its a sensible, balanced policy.
There is also a process in the next couple of years of a review that is in the legislation from memory, which will look at this assistance and look at what the carbon price is offshore. Obviously, if the whole world has a carbon price or our significant trading partners have a carbon price that is broadly equivalent, then the justification for the assistance is reduced and that can be taken into account.
KELLY: Electricity generators arent happy. They say, again, they werent consulted and theyre describing this change as exacerbating an already uncertain investment. Theyre talking about sovereign risk involved in chopping and changing like this.
WONG: If thats the case then there is an even greater sovereign risk from Tony Abbotts plan and I hope they are saying the same thing publically and privately to him about a policy thats about unilaterally removing a price signal.
But the reality is for generators that have a big carbon liability, the argument that a carbon price will affect their asset values, which has some public policy merit I would think people would expect that value effect would be reduced if youve got lower carbon price. And so its only sensible that the Government says, if youre going to have a significantly lower carbon price, therefore were not going to give you quite as much assistance as was previously envisaged. I think thats a pretty reasonable position.
KELLY: Minister, youve spent the last three years defending the carbon tax. Now, youre arguing why its a great idea to dump the carbon tax. Do you ever feel confused or conflicted by Labors own policy?
WONG: No, because this is precisely where we wanted to end up. I think Ive been on your program a number of times over the last five years Fran, and you will recall we went to the 2007 election with a commitment to an emissions trading scheme.
Weve negotiated long and hard with Malcolm Turnbull for an emissions trading scheme; we were unable to get it through the Parliament. We went to the 2010 election wanting to put in place an emissions trading scheme and had to negotiate a fixed price though the Parliament. My view is were finally getting to the place which is the best policy position for the country.
KELLY: Penny Wong, thank you very much for joining us on Breakfast.
WONG: Good to speak with you.
ENDS