PETER VAN ONSELEN: Senator Penny Wong the Finance Minister, thanks for joining us.
WONG: Good to be with you all.
VAN ONSELEN: Your comment there we just played about theres no justification for the banks to increase rates beyond the cash rate. The minutes from the Reserve Bank that came out suggested otherwise, didnt they, when they made the point that there is an increased cost for lending and there is a compression between funding and lending, and even that the Reserve Bank was taking into account when it was increasing interest rates that the banks were actually looking to move more than that?
WONG: I think theres been a range of data out, including from the Reserve Bank in other
statements, which show that the net interest margins of the banks are back to where they were prior to the Global Financial Crisis. So I think it is quite clear that net interest margins are broadly where they were before the financial crisis and I think that is part of the reason why Australians have expressed such concern over banks moving above the official interest rate rise.
PAUL KELLY: But Minister, the Reserve Bank accepts this. The Reserve Bank says explicitly, says explicitly, that in setting the cash rate, it will take into account interest rate movements by the banks.
WONG: But thats a different argument Paul. If they do that as the independent setter of monetary policy, thats a matter for them. The point we are making as a Government, and I think the same point the Australian community is making, is that when you see bank profits where they are, when you see net interest margins returning to pre-crisis levels, its very difficult to see how the banks can back in their decision to move above the cash rate.
KELLY: But isnt the situation here that youre taking a position that you, the Government, cant enforce?
WONG: We are responding to what the banks are doing but were not doing what Joe Hockey and others have advocated, or what the Greens are advocating. Were not pretending that theres a silver bullet, were not going to re-introduce regulatory regimes which historically we know have made things worse for Australian consumers and people trying to get home loans.
But what we will do, and what we have been doing, is trying to support competition. Because we do think the market is the best way forward. We do think regulation as we know historically has meant higher prices for credit for Australians. The way to deal with this situation is to try and facilitate competition, support competition. Weve put in place a range of measures to do that including the investment in residential mortgage-backed securities.
And well keep doing that because as Ive said repeatedly, and as Wayne Swan has said, banks knowing that you can go down the road and get a different product at a cheaper price is the best way to try and make sure they offer good products at the right prices.
KELLY: OK, well just changing subject moving on to the NBN. The Government has got this business plan which it will be releasing in several weeks time. Do you think as a result of the business plan that the total capital cost of the NBN might be significantly below the $43 billion?
WONG: Lets just step through what we know to date and what weve done to date. Because in some of the commentary I think how much the Government has already put out there has been a little lost. We had a very lengthy process of the expert panel which included Ken Henry and others from industry who said this is the best way to go. The private sector cant fund it, talked about fibre as the best way forward. We then had the implementation study which laid out the case for it and talked about it was a very lengthy document as you might recall.
But it is true that the implementation study didnt factor in the agreement between NBN Co and Telstra, which is obviously a very significant change in Australias telecommunications sector a very welcome one. I think most commentators, probably including yourself Paul when you looked at this issue, would say that the need to structurally separate Telstra was critical to that market.
Now obviously, weve got the business case, the Prime Minister has made clear that well go through that exhaustively, carefully. Its a very lengthy document. The Government needs to consider it and needs to consider the various aspects of that documentation. Also, in the light of, as you say, the Telstra agreement.
NIKI SAVVA: Sorry, have you read the report? Have you actually read the report?
WONG: No not all 400 pages Niki.
SAVVA: A summary?
WONG: Im one of the shareholder ministers so obviously were in the process of going through that. But its a very complex and technical and lengthy document which contains a whole range of commercially sensitive information.
KELLY: How will this document change the debate?
WONG: I hope that we can try and get more facts on the table because what we are facing is an Opposition that is quite clearly out to wreck this reform. And thats not just a line. Barnaby Joyce has said quite clearly that this is what enabled the Gillard Government to form Government; this is what the independents came over for. If we take this card out, the whole house falls. Thats the agenda. Its not good policy; its not checking that the finances are right. Its a political attack
VAN ONSELEN: In fairness, Malcolm Turnbull told Meet The Press that if it went to the Productivity Commission and the Productivity Commission came back with positive findings, then he would consider that a much more difficult job to wreck it.
WONG: Peter Ive had some experience with dealing with Mr Turnbull and he is someone you can have a discussion with. Whether or not hes someone who can deliver any part of the Coalition is another question.
VAN ONSELEN: Is that all the more reason to send it to the Productivity Commission?
WONG: I think Barnaby has made clear the political agenda. Its about trying to tear this down. I think Tony Abbott has made it clear his political agenda. He simply opposes it. We believe this is an important reform. We also believe its proper to work through it methodically and carefully and we will do that.
KELLY: But if its so important and you want to work through it so carefully and so methodically, surely you would do a proper cost benefit analysis.
WONG: We have done an implementation study.
KELLY: Which is not a cost benefit analysis.
WONG: It does lay out the costs and the business case also goes to that. I mean it depends where you think you are in this debate. We are of the view that the need for broadband in Australia is established. We are of the view, because of the work that has been done, that laying out fibre is the best way forward. We are also of the view that structurally separating Telstra is the best way forward. The important public policy question is how do you best structure the role out, how do you best fund that? To make sure that is properly done, methodically done and transparently done.
KELLY: But your own department and the Treasury have advised the Government that there are financial risks involved in this project. The OECD has highlighted a series of problems and doubts in relation to the structure of the model and said there should be a greater emphasis to look at the costs and benefits.
WONG: With respect there are a number of things the OECD said. They also point to many of the benefits the project.
KELLY: Thats right they did, they did but they also stressed the downside Minister quite heavily.
WONG: And I think I have made very clear this is a big project. It is an enormous nation building project and it is being done because of the benefits I think Australians see of having high speed broadband. What that will mean for our health sector. What that will mean for our education sector, what that means for the competitiveness of our businesses.
So we have said very clearly, we have laid out the implementation study. Of course there is more information that needs to be outlined to the Australian people but we are not going to release that until we have had an opportunity to consider the commercially sensitive aspects of that and to make proper decisions in a methodical way.
VAN ONSELEN: Minister Wong can I ask the Government has made it very clear as its mantra that it will get the budget back into surplus in three years time no matter what. Is that really responsible talk? I understand you might think its politically necessary. But is it responsible the international environment is getting worse. In Ireland there is real default prospects there. If there was the need in a new GFC for bailouts and for the budget to blow a little surely you would have to accept, in that sort of a construct, you wont get the budget back in three years time.
WONG: You are a brave interviewer to ask a Finance Minister if getting the budget back to surplus is a good thing? Of course it is a good thing. Lets remember, we went through the Global Financial Crisis and our response to it with a very clear set of rules about how we would then exit deficit when the economy returned to at or above trend growth. Thats where we are and we are determined to bring the budget back to surplus. There are a range of reasons for that. One of them is that was our commitment to the Australian people. The second is we think that is sensible economic management.
VAN ONSELEN: Unless circumstances change.
WONG: We have set our fiscal rules. I think the challenge
SAVVA: Surplus at any price? Surplus at any price?
WONG: I think that we can sensibly bring the budget back to surplus given where the economy is going. I think the last term of the Government was probably, or characterised by many things some might say, but the overarching imperative was to keep the country out of recession, to overt recession. That was achieved.
I think the challenge of this term is how you manage growth and how you manage growth sensibly. How do you use the benefits of this mining boom well? How do you try to invest in your people, in skills, in other parts of your economy through lower company tax rates?
SAVVA: You seem to be locked in this mantra you know budget surplus three years early, three years ahead of time, you know at all costs, at any price.
WONG: I am not sure what you mean by at all cost?
SAVVA: Well I think for instance on the fair work for fair pay decision for women, how would that affect the budget surplus?
WONG: What we have said on that, the Labor Party is absolutely committed to pay equity and the reason this case has been taken is (a) the union has pushed it but as importantly the amendments to the act were introduced which enabled this sort of case to be taken. I and many others in the Labor movement in past lives and in this one have argued for pay equity.
All we are saying in the context of our submission to Fair Work Australia is yes we support pay equity, and I think that is clear, but we are also saying this does occur in a context where we have to budget sensibly and we have to bring the budget back to surplus. So budgets are about priorities and they are about choosing between different types of expenditure and thats what we will have to do.
VAN ONSELEN: One of the things Wayne Swan has really crowed about is the fact that he found over $80
WONG: He has crowed?
VAN ONSELEN: Maybe crowed is an unfair word but
WONG: Its a heavily laden word.
VAN ONSELEN: He has boasted about over $80 billion in savings. But when you break it down he is counting both revenue and expenses. In other words he is counting as a saving when you pluck $150 million as a special one off dividend from Australia Post, he is counting any tax increase, cigarettes or whatever it might be. Do you regard tax increases and one off dividends as savings?
WONG: First lets remember we have delivered $83 billion worth of savings in our last budgets. Second the .
VAN ONSELEN: They are not savings are they?
WONG: The approach to savings has always included the sorts of measures that you have
described. That is we are not doing something new. This is how governments including Peter Costello have dealt with savings. But the third point is this. It is ridiculous for Andrew Robb to be criticising us for this when in his own election costings he included some, I think, $13 billion worth, of the sorts of savings you have described. So he cant have it both ways, either
VAN ONSELEN: I will be critical of both though.
WONG: You can do that. You can do that. I have seen Andrew Robb out there criticising us on this. It is ridiculous. I mean this is a man who did not get his costings right. He is now attacking us for counting the same sorts of things he counts. If he says he doesnt count them he would be $13 billion worse off.
KELLY: But just on these point about the budget. Is it your job as Finance Minister to essentially deliver the declared outcomes across the forward estimates and return the budget to surplus as projected? Or do you think there should be more fiscal policy insurance as a number of people have advocated? Do you think there should be in fact be a tightening of fiscal policy given all the risks in the economy and capacity constraints and so on?
WONG: I think there are a few issues in that question. In many ways the answer to them are probably the same sorts of things. Yes I do believe we should bring the budget back to surplus. There are a range of reasons for that. One of them is what you referenced in the last part of your question which is you do want to be in a position, if the international outlook worsens, if the risks worsen for the government, to respond to that.
But you also I think are referencing longer term sustainability. I assume thats what you mean by insurance and I have said a number of times since I was given this position, that I think its very important that when we make decisions for the now we also have regard for how they impact in the longer term. Really that is about making sure when you judge what it is you need to do to bring the budget back to surplus, you also have an eye to the longer term, Navigate the politics of today but set the course for the long term.
VAN ONSELEN: Penny Wong in the time that we have left can I ask you about this issue of gay marriage that is being debated. You have been open and honest about your sexual orientation. How do you feel about your Prime Minister opposing gay marriage saying its a construct that should only be between a man and a woman? I notice today in the Sunday Telegraph she is at one on that issue with Piers Akerman and Miranda Devine.
WONG: Its not an uncommon view is it? My view on this issue I have made clear. I think that there are a range of views inside the party. We will have that discussion through the appropriate party forums and processes. Thats the way I have dealt with these issues in all the time have been in the Parliament, its to deal with them through the proper processes.
VAN ONSELEN: What will be your position through that?
WONG: I think as I said I will deal with it through the proper processes. Can I say on these issues I think its important to think about the different ways in which you argue this. Some people put their views publicly, others put it through the party forum. I have always taken the view it has been important for me just to be completely open about who I am and to deal with questions about that very clearly and to not hide the fact that my partner is a woman. For me that has been important because I dont think that has been relevant to my capacity to do my job. Certainly the Labor Party has always, I hope, judged me on my capacity rather than my personal attributes.
SAVVA: Can I congratulate you on that on your openness on that but put it to you this way. The Prime Minister is not married, youre not married. If the Prime Minister chooses to marry she can do so, even if you wanted to you wouldnt be able to. Is that fair?
WONG: Niki as I said on these issues I will put my view through party processes and party fora as I always have. I am very proud that the Labor Government delivered so much change that was important to the everyday lives of gay and lesbian Australians. A number of us inside the party were part of that push and I am proud of what we delivered.
VAN ONSELEN: Do you think Labor doesnt get enough credit for that?
WONG: I think possibly that is true because sometimes its easy to get caught up in a different political debate. I think changes to Medicare, social security, changes to I think some 80 pieces of Commonwealth legislation. That has been important.
I accept that some people have a very clear view about marriage, but leaving that to one side for a moment we certainly delivered a lot of reform in this area. More reform than any federal government ever has when it comes to equality on the basis of sexual orientation.
KELLY: Why cant you tell us now in this interview what your personal view is on the issue of gay marriage? I mean Julia Gillard has publicly given her personal view; other Cabinet ministers have given their personal view.
SAVVA: Male heterosexuals have, why cant you?
KELLY: Why cant you give us your personal view now?
WONG: Because I have always taken the view that when I joined the Labor Party, stood as a candidate for the Labor Party, got pre-selection and then was privileged enough to become a frontbencher that my job was to advocate Labor Party policy and to argue for reform on those issues where I wanted change from the inside. Thats the view I take about my role.
KELLY: OK well can I ask the question another way then.
WONG: Persistent this morning Paul.
KELLY: Do you think this issue should be an issue where Labor as a party takes a position, or do you think its more appropriate given the issue that Labor should decide that this is a case for individual conscience?
WONG: I think you are actually referencing one of the primary issues the party will have to resolve at the national conference next year. That is precisely one of the issues the party will have to deal with next year.
KELLY: What is your view on that?
WONG: I again say I have a very firm view about how I approach these issues. Thats how I will continue approaching them.
VAN ONSELEN: Senator Penny Wong Finance Minister we do appreciate you joining us here in the studio for Australian Agenda.
WONG: Good to be with you.