JOURNALIST: Senator Wong, thanks for joining us on Switzer.
WONG: Good to be with you.
JOURNALIST: OK, lets start off. I must say, Im conflicted. You might know, I wrote a book called Carbon Crunch.
WONG: (laughs) You did, but your columns have been pretty negative
JOURNALIST: Exactly, and Im negative primarily about timing, but well talk about that later. Tell us why
WONG: Its never a good time.
JOURNALIST: Well, that could be true, but there can be better times.
WONG: You said you said you wanted to talk about it later. Im just making the point that, I reckon in life, in politics, and in economics, no hard decision got easier by putting it off. And we do have to do this at some point. We also know that theres an economic cost the longer we wait. If you want to make an adjustment, youre better off starting earlier and making it smoother. Thats a much more economically efficient way to do it.
JOURNALIST: I think that there are some stories of life where your little homily actually does work, Penny. Youre getting a
WONG: (laughs) Homily?
JOURNALIST: Not procrastinating. All those sort of things I agree with. But lets just work our way through the story. Because the first thing I said, I think, some people think, the carbon tax is ill-conceived. Now remember, my point of view is, Ive got viewers out there who do think its ill conceived, whether its right or wrong. Is it ill-conceived?
WONG: No its not.
JOURNALIST: OK, why?
WONG: Because, if you want to reduce pollution and both sides want to do it, want to reduce pollution the cheapest way to do it is to put a price on pollution, because then you give a price signal.
And what does the price on pollution do? Really, it does a couple of things. The first is that it gives an economic incentive to business to reduce their pollution. So, the 500 largest polluters, who will pay the actual price on carbon, they have an incentive to reduce their pollution, to try and work more efficiently, to try and produce things with less carbon output.
The second thing it does, and this is important, is its a signal to investors. So, youve got capital saying where do I want to go? Its a signal that says invest in clean energy, clean technology, and the infrastructure that supports that, not in the old economy. And thats how you get the shift in your economy over time.
JOURNALIST: The thing is this, when you guys changed your mind, and we know there was a change of mind because the Prime Minister said before the election that there wouldnt be a carbon tax, true? She said that, there must have been a change of mind.
WONG: She did say that, but lets be clear what the change of mind was. It wasnt that we ever said were not going to act on climate change. I dont think anybody is suggesting that.
JOURNALIST: No, you said no carbon tax.
WONG: We have always said weve wanted a price on carbon. Our policy was for an emissions trading scheme, which is a cap and trade system, a market-based system rather than a tax.
JOURNALIST: Which a lot of businesses would prefer, an emissions trading scheme.
WONG: Sure, and well get there. But, the difference is, weve had to have a three-year interim fixed price period, which operates like a tax. Thats temporary. Three years, then we get to a cap and trade system, which is where we wanted to be. So, there has been a change, but that is the only way we can get a price on carbon up, and we think that we need to.
JOURNALIST: Yeah but a lot of people are saying that, because the Prime Minister said before that there wouldnt be a carbon tax, and now there is, thats one of the things that a lot of people cant get past. You understand that?
WONG: I understand that.
JOURNALIST: And of course they say the reason that the Prime Minister changed her mind is the Greens have made her do it. Whats your response to that?
WONG: I dont think thats right. I think that
JOURNALIST: Well, you know that is a prevailing view.
WONG: Its something that has been written about. But its absolutely not
JOURNALIST: Crap, I guess the Prime Minister would call it.
WONG: (laughs) I wasnt going to use that word. Would you like me to?
JOURNALIST: Well, you can use it, it would make a good sound bite for the program.
WONG: Now youve made me lose my train of thought.
My point is this. Weve always said we wanted to act on climate change, weve always said we wanted to price carbon. It is true we had to go down the path of a fixed price, which operates like a tax, for a period of time, to get where we want to go, which is a cap and trade system and an emissions trading scheme.
JOURNALIST: OK, well lets
WONG: And thats Labor Party policy. Not Bob Browns policy, remember that.
JOURNALIST: But I do suspect see, you guys knew that you had tough political years ahead because youre a minority government. And if Bob Brown said, look, why dont we go to the next election or you guys go to the next election and say were going to have a carbon pricing policy in, and you, the Australian people, can either vote for it, or not. I think you guys would prefer that, rather than having to bring it forward when youre a minority government, when you really are exposed
WONG: Hang on Peter, one of the things that we keep forgetting in this discussion is how long weve been talking about this as a country.
JOURNALIST: And you were the star talker.
WONG: It was before me. 2006 was when John Howard was approached by the business community, people in the Business Council of Australia, to put a price on carbon. That was when he initiated his task group on emissions trading, and they produced a report. And then he went to the 2007 election saying hed do what were doing, which is to put a price on carbon.
JOURNALIST: But not a carbon tax, he was going to put an emissions trading scheme up.
WONG: Well yes, fixed as opposed to non-fixed price, thats true. But they are different ways of putting a price on carbon.
JOURNALIST: Warren Buffett says, well, maybe not Warren Buffett, it could have been John Maynard Keynes said when the facts change, I change my point of view.
WONG: Sure.
JOURNALIST: Now, Howard, and you guys, when you first got on board pre-Copenhagen, everybody was signing up. Thats why I wrote the book, Carbon Crunch. It was coming. But now the worlds put it on hold. Theyre really (inaudible) with the GFC, and all these debt issues, but were jumping the gun.
WONG: I think theres two points. One, I dont think the world has put it on hold. So I think theres a distinction between what the legal framework through the United Nations might be which was what Copenhagen was about and what economies are doing. And whats China doing? Installing more and building more and manufacturing more renewable energy wind turbines, solar panels than anyone in the world.
JOURNALIST: But a lot of the direct stuff is like Tony Abbots stuff, isnt it?
WONG: Well hang on, what is Europe doing? Price on carbon. What is America doing? 80% clean energy target. What is India doing? Coal tax. So there is action occurring.
But theres an economic argument as well. If you think and I think in your book you recognise this wheres the globe going to go?
JOURNALIST: The market is moving that way.
WONG: Exactly. So if were the most carbon intensive economy in the world advanced economy dont we have an economic interest in making this transition? Were not going to be able to compete in 10 years time.
JOURNALIST: I think thats a good point. But the thing is, is the time right. To run through it now, Penny, youve got the world worried about debt. Theres a possibility the US will go through a double-dip recession I dont think it will, but people are worried about it. Youve got the European problems. Youve got the (inaudible) economy, a large chunk of it, youve got problems with the high dollar, the competitiveness thing. And you want to put a tax on carbon now. Thats the timing thing. Why not wait two years, three years, until the whole world says were going ahead like we were pre-GFC.
WONG: Well it comes back to what I was saying. Its because it costs us more in the long run if we dont start to give that signal. So if you think about investors now, if you dont give them that signal, and they invest in technologies which pollute a lot, infrastructure that is not about reducing pollution, how long does that take for us to shift that in the years ahead? Fundamentally, it comes down to economic costs. And it is true, Im not suggesting there arent risks in the global economy. And obviously theres been an impact on sentiment, particularly because of whats happened in Europe, I think. But were in a very good position here in Australia.
JOURNALIST: I suspect that you thought that wed be in a lot stronger position, that wed be going absolute gangbusters. Everyone was telling you that the business investment was going to come in like a tsunami. If you go back to May when Treasury was putting their forecasts out and youre in Finance, you must be saying, those guys kind of got it wrong in May. Theyre a bit more negative now than they were in May surely?
WONG: What were seeing is its very much the story we spoke about at the Budget. Youve got a high dollar, thats obviously impacting. Youve got cautious consumers, people saving a lot more than they used to. And I can remember when we were wanting people to save a lot more than they were spending, that was a discussion that happened for many years.
And youve got the risks in the global economy. But lets keep it in perspective. The fundamentals of our economy are extremely strong, weve got $430 billion of investment on the books, weve got low unemployment, weve got strong jobs growth and we have got very strong public finances. At our peak, our net debt is about one tenth of the major advanced economies.
JOURNALIST: Have you thought that part of the reason why were seeing a slowing of the economy now is because that non-mining part of the economy, business investment is starting to stall there, and once upon a time we thought we were going to have both export, miners investing and the normal investment in the economy and thats tailing off. And I wonder throwing a carbon tax at them, you got a mining tax as well, you also changed the wage system, the wage system is a bit more challenging for business better for workers but more challenging for businesses. Is it a great idea to do that at this point in time?
WONG: I think that some of the issues that youve raised were issues we were talking about during the Budget. You know, we said this high dollar is making things much harder for parts of our economy. But youve got to think about the medium and the long term. And the medium and the long term, are very much about a very significant wave of investment in this country. And the medium and the long term are about needing to shift to an economy that pollutes less and has more expertise in clean energy and clean technology because that is where the prosperity of the future, the competitive advantage of the future resides.
JOURNALIST: I dont doubt that, my greatest problem is that we get too far ahead of the curve and in a transition, in a transition we could suffer. At the end of the day you could be suffering when the next election comes around as well.
WONG: (laughs) We also have got to do things which are right for the country. Lets just keep this in perspective.
JOURNALIST: (laughs) You are more noble than I thought Penny.
WONG: Well lets get in perspective about a 0.7% impact on CPI, is the impact of the carbon price.
JOURNALIST: If you trust Treasury forecasting.
WONG: Oh well
JOURNALIST: (laughs) Im an economist I dont trust Treausry, you know that.
WONG: 2.5% was the impact of the GST. And we put in place a very significant amount of tax reform, which is very focussed on participation. Thats really the tax reform package that the Prime Minister has put forward as part of the assistance here for the carbon price.
JOURNALIST: There are a lot of people out there who dont trust the science. Whats the standard reply from you guys when they say that there are not all the sceptics are complete nincompoops, you know that. Some are respected scientists who just dont agree that would say that weve had periods of ice ages, higher temperatures and sea levels have gone up and gone down. Whats your answer, how do you actually tell people out there, who are watching this program right now that the science is worth believing in?
WONG: I think this is about risk. Its about what sort of risk, youre prepared to impose upon the next generation of Australians and their children. And if youve got the majority of the worlds climate scientists saying that carbon dioxide and related gases contribute to climate change. If youve got the data that shows that every decade since mid-century is warmer than the previous one and that in the last decade weve seen the hottest decade in history. If much of the evidence that were seeing matches what the scientists are telling us, then I think to not act is to really say we are imposing an unacceptable risk on the next generation.
JOURNALIST: The fact that the rest of the world is not going with you, I know you said theyre doing things but remember Penny there are people out there watching this and saying this as well.
WONG: But I dont think we can simply say no one else is doing anything.
JOURNALIST: But when we have a carbon tax you must admit, we will go middle of the pack, even back of the middle of the pack, to close to the front. To impose across our country a carbon tax. No other country is doing a carbon tax right across the country are they? But if so
WONG: Well were not doing right across the economy because there are sectors excluded like petrol, for example. It is true different countries impose costs in different ways.
JOURNALIST: Were going to be good otherwise youre going to give us a second rate carbon tax. Youre going to argue that on my program, this is a second rate carbon tax?
WONG: This is the point isnt it? The other alternative is to regulate and impose a cost. Youre an economist, you know that. That imposes a cost. Tony Abbotts policy is to take your taxes, give it to polluters so that you -
JOURNALIST: Its a carrot rather than a stick system.
WONG: Its actually just inefficient because you can have one factory who can get a whole heap of your taxes to reduce their emissions and a new factory builds next door old technology, inefficient. No net benefit to the atmosphere but lots of taxes gone.
JOURNALIST: But the fact that not everyone is moving at the same time. It does mean we are putting ourselves at a competitive disadvantage. Even if its just for a short period. One or two years. I guess the big issue out there is why people are saying. I guess that people out there are saying that were so small in absolute. Were big in per head terms - yes I know. But were not going to have any real impact on climate as a small country. Are we doing it just to make people feel embarrassed, that theyre not as good as us?
WONG: No I dont think thats fair. I think If you say were small and we dont matter, essentially youre saying we may as well throw up our hands and say climate change is someone elses problem.
JOURNALIST: You would be a follower of the real big emitters, USA, China and India. Why not be a follower?
WONG: And they are acting. But the question is, where do you want to be at 2020. If both parties are saying we need to reduce pollution, then it really comes down to what is the best way to do it. And everybody is saying, anybody who has got sense in this debate in terms of the Productivity Commission, the people who advised John Howard, the Treasury. They say the cheapest way to do it is to price carbon.
JOURNALIST: You need other companies, companies out there that arent getting support. Bluescopes getting support so we cant trust them. This is a great idea, its a good idea what youve done. A company, say Fosters, if Fosters came out and said, we anticipate orders coming and weve already introduced fantastic measures, and were saving money and weve reduced our carbon footprint. Then I think you might have a chance of explaining to Australia, its not all bad. But at this point in time, there arent many companies out there saying look what weve done in response to the coming carbon tax. And look how great the outcomes are. Until you get that, I think you have a really hard case to argue.
WONG: It is a pretty hard reform because youre asking people to pay for something thats currently free. And thats the right to pollute. And you know its always easier to identify people who think they might be losers than people who think they might be winners. But I think in 5 or 10 years time, well look back and think we really got on the right path there. And heres all these industries, all these different jobs, all this investment in renewable energy, clean energy technology that we didnt have that this price on carbon has helped us deliver. Australian innovation and the right market signals.
JOURNALIST: One last question, once youve sorted our carbon future, will you make us all eat properly and put restrictions on what we eat because you care about our health?
WONG: Well I figure youre old enough Peter to make those decisions. I was going to say old enough and ugly enough, but thats not very kind is it? (laughs)
JOURNALIST: No, no.
WONG: But I think we all have to make our own decisions about that.
JOURNALIST: OK, Senator Wong, thanks for joining us.
WONG: Great to be with you.
ENDS