VAN ONSELEN: Were joined now by the Finance Minister, Penny Wong. Ms Wong, thanks for your company.
WONG: Good to be here.
VAN ONSELEN: Can I go straight to the mining tax? Its only been a couple of weeks since the budget was announced. The surplus is all important in 2012-13. Colin Barnett has punched a bit of a hole in that. At that rate, if this keeps happening or if other states join in, youre not going to get to surplus by that date, are you?
WONG: Were committed to getting to surplus, and you and I have had this discussion previously. That is the commitment from the Government.
Can I just respond to one thing that Paul said? I thought what was interesting this week and significant this week was not just the issues Pauls raised on the other side, but the intervention of Nick Minchin, and that Nick Minchin in the party room confronted Tony Abbott about their position on LPG excise and pointed out if youre going to oppose it you have to put up savings if youre going to be fiscally responsible.
I thought that was very important because what it said was, even Nick Minchin understands that Tony Abbott needs to stand for something, not just fight against things. Abbott made it clear in that interchange, as has been reported, that when hes confronted with raw politics versus good policy, hell always go the raw politics. Even Nick Minchin understands leaders of the opposition have got to do better than that. Back to the mining tax.
VAN ONSELEN: I was about to say, Im not even sure how you segued into that!
WONG: I wanted to respond to Pauls analysis, because I think that is another aspect that was of significance this week. You know, this is disappointing from Premier Barnett. It is an own goal because, as the Treasurer has made clear, the GST distribution will be affected by this decision, but I think you know it is a disappointing decision because it does mean that theres been a fair bit of politics played in terms of the imposition of a royalty, which is not necessarily going to benefit Western Australia.
VAN ONSELEN: But a lot of people out of WA, the government but also the Under Treasurer Tim Marney are recalling conversations that they had with the Treasurer Wayne Swan, where they felt that they had his tick of approval to be able to do this and to only receive the minimal response in terms of GST penalties.
WONG: Yes, and I have read some of those propositions and I think if you take it through its quite clear that subsequent to any raising of this we also had eight occasions on which the Premier of Western Australia said he wasnt going to do this. Now is the proposition that the Federal Government should somehow have set itself on the basis that Premier Barnett had lied eight times? I mean thats really quite a ridiculous proposition, I wouldve thought.
KELLY: Minister, just looking at the mining tax, its obviously incredibly important for the government to be able to legislate the mining tax. Is the mining tax in trouble politically?
WONG: Look, the mining tax will be put before the parliament and we will prosecute it vigorously. And the reason we will is for the reason that many sensible economic commentators have made. Australia is in a position at the moment where we are selling at very high prices what are non-renewable assets, thats our resources. Were going to do that for an income stream, and the important thing for this generation is we get that policy setting right and we get a sensible income stream for something we know eventually we dont have as much of, or eventually wont command as high a price. Thats what the minerals tax does, and it seeks to invest some of that income stream into things which help the whole of the economy and would help also Western Australian businesses, such as a reduction for small business in the company tax rate. Thats something I wouldve thought Western Australians would want as well.
KELLY: Sure. But how confident are you that the mining tax can pass?
WONG: I believe it is a very, very sound agenda. We will prosecute it vigorously. As in all things in this Parliament, we have to negotiate. But we went to the last election with a very clear view about what we were going to do here, and I think the Parliament will need to deal with this issue sensibly.
STUCHBURY: Minister, we had the debate in parliament about whether the Western Australian Premier did or didnt give a heads-up to Canberra. Western Australians say we didnt need to give a heads-up, we dont need a tick from the government, and theyre saying that under the current federal-state financial relationships that their GST distribution is going to fall to 33 cents in the dollar. Theyre saying thats basically unfair, and isnt this basically a revolt by the Western Australians over federal-state financial relations and the mining tax?
WONG: I think what were seeing is Premier Barnett playing a bit of politics, and I think this is a question of what is happening between governments, then there are broader questions about the economic relationship between the commonwealth and the states. We did listen to Premier Barnett in the propositions he put earlier in the year about the distribution of the GST, and you will recall that a review was put in place, in great part in response to the issues he raised.
VAN ONSELEN: Kevin Rudd said something similar though before the 2007 election.
WONG: But we actually put a review in place, so we actually have a panel in place to look at this issue, in large part in response to the urgings of Premier Barnett. So it does seem a little bit odd that youd get that in place, but then youd impose royalties which you know absent the commonwealth doing anything are actually going to be an own goal and your state wont get the benefit of.
STUCHBURY: But isnt he just putting pressure on that review that Julia Gillard has announced, to agree to the Western Australians floor or 75 cents in the dollar, they should at least get 75 cents, no less, of every one dollar that comes in GST that should go to them? Do you have sympathy with the 75 cent floor that the Western Australians are seeking?
WONG: I think the distribution of the GST is something this panel should rightly look at. There are a number of issues that the panel should look at, including what are the incentives which are inherent in the mechanism, inherent in the criteria, and thats something the Prime Minister spoke about.
KELLY: I wonder if we could just clarify the position of the Commonwealth in relation to what Premier Barnett has done. Will the Commonwealth take financial retaliation against the Western Australian government as a result of this?
WONG: I dont think theyre the right words, financial retaliation.
KELLY: Im certain you wouldn't agree with the words, but what about the action itself, the impact?
WONG: Yes, well weve said two things. Wayne Swan has made clear two things. One is were not going to be instructing the Grants Commission to alter how it should deal with this issue, simply because Premier Barnett chose to impose higher royalties. But weve also said in terms of projects funded through the income stream of the minerals tax that are not yet announced, so obviously weve announced a range of projects such as the Gateway Project, Oakajee Port, etcetera, but in relation to subsequent projects, it obviously makes it harder. If you have an income stream thats been affected by the royalties, it makes it more difficult to put infrastructure funded out of that income stream into Western Australia, which is what we have previously said. I mean the whole point of that income stream is to try and do the things that are needed in the economy, increase capacity, reduce company tax and increase national savings.
KELLY: But what youre saying is that Western Australia will be penalised as a result of this action.
WONG: Thats not penalisation. No.
KELLY: But thats the meaning of what youve said.
WONG: No. I dont agree. Its not about punishment, and I dont agree with that construction.
KELLY: Well lets talk consequences.
WONG: And Ive said that. If you have a lessening of the income stream from the minerals tax because we have to credit the royalty, then obviously it means fewer things can be funded out of it. And one of the things we were very keen on continuing to fund was increased investment in infrastructure in the resource states. Now weve announced substantial amounts already in WA, but obviously this does impinge on future announcements.
VAN ONSELEN: Another consequence has to be the need for a mini budget, doesnt it? I mean when you add up the carbon tax coming in, thats going to have a real impact. When you then add to that the realities of the change of arrangements now courtesy of the higher royalties rate and what thats going to do to the budget bottom line, is there more chance now of a mini budget?
WONG: Well you know since Ive been Finance Minister, weve done a MYEFO, we did the flood statement, which was a pretty substantial financial statement, and a budget. So we will update figures as appropriate and we have said that post the carbon price that we will in our next update ensure that the figures are updated appropriately.
VAN ONSELEN: And that will obviously include the consequence in the federal governments view in terms of the financial impact of mining.
WONG: You cant pick and choose in budget updates. Youve got to update everything.
STUCHBURY: Talking about punishment or consequences for WA, would that leave you in a situation where the government is continuing to throw money at country electorates such as Tony Windsors, hospitals, even a university campus for Mr Oakeshotts electorate, for people who will agree with federal government, but when a Western Australia government which, as they point out, they have constitutional ownerships of the rocks and they want to draw a concession on their iron ore royalties, Labor then federally takes money away from them?
WONG: I dont agree with the premise of the question. First in relation to investments across Australia through the health and hospitals fund, in the last budget there were a great many projects funded, not only in Mr Windsors electorate, not only in Mr Oakeshotts electorate, but around Australia in many electorates that are not held by the government, because this was a very large investment in regional health. And thats a good thing. So I dont agree with the premise of the question. But in terms of Western Australia, as I said, this is about the income stream from the sale of these commodities and these resources. Obviously if there is any impact on that, then we have to look at where we will be able to continue to announce infrastructure -
STUCHBURY: Can I ask you-
WONG: - Thats on the back of quite a number of infrastructure projects that the commonwealth is already funding in Western Australia.
VAN ONSELEN: Can I ask a political question in all of this?
WONG: What, none of this has been political?
VAN ONSELEN: Actually a more sharply focused political question, has the Government written off Western Australia? You only hold four of fifteen seats; its a parochial argument being run by the Western Australian Premier which plays out well in the west. I know that part of Australia well. Labor, I wouldve thought in a bubble, would be hoping to pick up seats there, only holding four of fifteen; but if anything now with this ongoing debate, it looks like the likes of Gary Gray could even find themselves in trouble in a seat like Brand.
WONG: What Id say to Western Australians is this, your Premier has put up royalties for political reasons in a way that is not going to advantage Western Australians as much as it should.
VAN ONSELEN: But theyll blame your government for that, not him, I think.
WONG: Secondly what Id say to them is this minerals tax is very much focused on precisely the sorts of challenges and opportunities Western Australia is facing, very high prices for selling something that we know is non-renewable. So you have to use the income from that sensibly, and what are we doing with the minerals tax? We are saying more superannuation payments, including for Western Australians, lower company tax for small business first and then the rest, other companies, also good for Western Australians, because remember its an economy that is booming, but not everybody is in the mining sector.
So the same issues that play out in terms of the two speed or patchwork economy across the country, play out in Western Australia. And thats what the minerals tax is designed to do. So leaving aside all the politics, if we step back and we say for those states that have these resources where were getting this sort of price on them, isnt the policy proposition how do we best use that now for the good of the state now and in the future? And thats why we put forward this mining tax.
KELLY: If we can just move to the issue of tax, weve got a tax summit coming up later in the year.
VAN ONSELEN: Its a forum, Paul.
KELLY: Sorry, forum of course. Now what are your ambitions in terms of this tax forum? And will we see more substantive tax reform this term?
WONG: You know my first ambition on this issue would be for a better political debate and discussion on these topics. I actually meant political with a small p, because I think if you look at the history of reform in this country, and both of you have written about this, you know whether its in the 80s and 90s, whether youre looking at the breaking down of the sort of protectionism in the tariffs, the floating of the dollar, deregulation of our financial services sector, most of those things were done with a broad political consensus across business leaders and key leaders in the political scene. I think were lacking that now. Were lacking that because of the position Abbotts taking, and I think its important for us to have a dialogue that is much more grounded in -
KELLY: - But a dialogue towards what objective?
WONG: I think Wayne has spoken about the fact this is obviously still to be scoped in more detail, but my personal view and I think the Prime Minister has said this, we do need to look at participation, we do need to work out how we can better look at productivity measures, how does the tax system encourage participation and productivity? Now we I think in the budget made some steps on the participation front, but you know its an expensive proposition and its one that does require a discussion thats grounded in some of the more difficult policy facts.
STUCHBURY: When you talk about the 1980s for example and previous tax reform issues and then going into Howards GST, although you might need to get a consensus, it also had a government leading and putting forward some quite strong policy propositions and a poll tax package. Weve had the mining tax and thats turned into a bit of a debacle.
WONG: You dont think thats a correct policy proposition?
STUCHBURY: Well in the way its-
WONG: Oh come on, Michael. I mean you write quite rightly often about the boom and you talk about the responsibility of governments to respond to that.
STUCHBURY: Yes.
WONG: Now you may disagree with the detail of the tax, but there is no doubt that is precisely the right thing to be doing.
STUCHBURY: In principle of course.
WONG: Yes, it is.
STUCHBURY: But isnt one of the problems, the way it was put up means that its ended up being-
WONG: In face of an Opposition that says this is a disaster for the country, if the other story-
STUCHBURY: Well Labor fought tooth and nail against the GST, I mean in Opposition.
WONG: But hang on. The interesting thing about the Barnett decision that we havent focused on is this ridiculous position of Tony Abbott. So Tony Abbott runs around the country saying if we have a mining tax, oh woe is me, the world will end. But if Colin Barnett puts up royalties, effectively a tax, thats fine?
STUCHBURY: We can take the point on Abbott on being Dr No on policy. But say were talking about participation, we dont really have a sense, you know, youve had supposedly a written branch tax review by Ken Henry, but we still dont really have a sense, apart from the idea we want to encourage participation, about where the government wants to go on tax reform.
WONG: But we have picked up a number of the Henry propositions in the budget.
VAN ONSELEN: But you took mostly the revenue measures and left behind the serious reform that requires the revenue.
WONG: I dont know if thats true. I think the Dependent Spouse Tax Offset and the changing to the taper rates for the parenting payment recipients, now thats not a revenue measure, the latter. That actually cost us money, but thats a good thing to do because what its saying to people is you will keep more in every dollar you earn. You know, youre making work pay. They are sensible reforms and they were flagged in the Henry review.
KELLY: If we can just go to the carbon tax, to carbon pricing, it seems to me one of the problems for the government here is that even if it legislates, that wont deliver investment certainty, because it will just have a new debate about what happens to future price levels and we know there are fundamental differences between the Greens and the Labor Party about future targets. So to what extent do you think that legislating the carbon scheme will actually deliver investment certainty?
WONG: Thats a very important priority, because the whole point about a carbon price, as you know, is to change the metrics for investors, and so you give more of an incentive to invest in cleaner ways of doing business. Were very conscious of that, so I think that transition from the fixed price to the floating price, which I think is what youre referencing, is something we are going to be looking at very carefully.
STUCHBURY: Isnt one of the issues of this, which hasnt come out really fully, whether what the government, what the Greens comes out with, puts Australia sort of at the forefront or out in front of international efforts?
WONG: I dont think theres much danger of us being out in front.
STUCHBURY: Are you sure? Like in the next few days -
WONG: Now come on, if you have a look at where so many other advanced economies are, and where Australia is as the most polluting developed nation on the face of the earth, I think the risk of us being at the head of the pack is -
STUCHBURY: - One, even if you have a global agreement, Australia still may be a carbon intensive economy.
WONG: True.
STUCHBURY: Two, in the next couple of days youre due to get the Productivity Commission report which tries to estimate the effective carbon price or something similar in our main competitive economies, the economies we compete against. Wont we have to make sure that whatever comes out of the Multi Party Climate Change Committee aligns with what the Productivity Commission says other countries are doing? Like you really need some hard numbers on these, dont you?
WONG: You do have to look at whats happening internationally, and that is why we gave very generous assistance under the Carbon Pollution Reduction Scheme for our emissions intensive trade exposed sector. But that is not the only metric. Isnt the other policy objective to say we have to start to shift our economy, so that we can compete in a world that will become increasingly carbon constrained? I mean its whether you think of this in the lowest common denominator perspective, or whether you think actually in terms of competing with the rest of the world, Australia has always done well, where weve looked to where the world is going and said weve got to compete there, weve got to get better there, weve got to get more efficient here. By 2020, does anybody really think that the world will not be more carbon constrained?
KELLY: Sure, but -
WONG: We should be able to compete in that world, and this is about ensuring we shift the economy to enable that.
KELLY: But just on this point, of course other countries are doing a lot of different things. However the major emitters, the United States, China and India, dont have a carbon price. Whats our justification for having one ahead of them?
WONG: Well, a number of other countries do have a carbon price, and you will know -
KELLY: But not the big emitters.
WONG: Hang on, they may have an effective carbon price, because you know that regulating imposes a price. We see regulation in India, we see regulation in China in terms of their intensity targets, their renewable energy investments. These things have a price. Its not explicit in the same way as were proposing and thats why were on the side of an explicit price, because thats a more efficient economic policy.
KELLY: So you think the government can sell this politically, do you?
WONG: Its a pretty tough sell, I acknowledge that.
VAN ONSELEN: One of the elements of-
WONG: And the reason it is, is because it is a big reform, and its a reform vehemently opposed by, as you described him, Dr No vehemently opposed.
VAN ONSELEN: Do you think that your ability to sell it is helped or hindered by having someone like Cate Blanchett on the front page of the News Limited papers today? Shes worth a lot of money, shes already been accused of being somebody preaching. Now shes a very good actress, but is that really the kind of in-touch person to sell the carbon tax?
WONG: These decisions about campaigns are decisions that different groups will make.
VAN ONSELEN: Whats your view?
WONG: My view is I think its fine to have people out there saying this is why weve got to do this, and well continue to do that because I think its a real pity in this country that weve been discussing this for so many years. Remember, the Business Council of Australia I think it was in 2006 pushed the former Prime Minister towards a carbon price, John Howard. Were in 2011, were still having an argument about whether its a good thing to do. Weve got to get on it.
KELLY: But the Business Council is very apprehensive of what the government is doing.
WONG: Theyre backing a carbon price and a market mechanism, so well have a discussion. Obviously they have the view of their members about how it should be constructed, but in 2006 they said to the former Prime Minister we need to do this.
STUCHBURY: And do you think the 10 per cent rate that theyve suggested in the last day or two is out of the ballpark?
WONG: The $10?
STUCHBURY: Sorry, $10 a tonne.
WONG: I think theyve got a view about the details. Well continue to have that discussion, but fundamentally theyre saying market mechanism carbon price, thats the governments position, not Tony Abbotts.
VAN ONSELEN: Minister Wong, we know youve got a cold, we appreciate you battling through it effectively and joining us on Australian Agenda. Thanks for your company.
WONG: Good to be with you.
ENDS

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