LIPSON: Penny Wong, thanks for your time this morning. The savings announced yesterday for this year include $1.8 billion worth of receipts, or more taxes, and $410 million in spending cuts. Why are the taxes more than the spending cuts?
WONG: Lets remember weve taken a lot of savings already. Each budget update weve had to take more savings because there have been revenue downgrades. And in this budget update weve seen $22 billion worth of revenue downgrades over the forward estimates, on top all of those we saw to date. I think the best figure to look at is the spending to GDP ratio so thats spending as a share of the economy and what youll see is that this year, and beyond over the forward estimates, we sit at or below 24 per cent of GDP. The last time a government achieved that was some 30 years ago.
LIPSON: But is the Government, is Labor, addicted to tax increases as the Opposition suggests?
WONG: Remember the only person suggesting, for example, a company tax increase is Tony Abbott, obviously, and his Liberal Party. So people who talk about tax increases perhaps had better have a look in their own policy kit-bag.
LIPSON: Are these the last spending cuts that youll make this year?
WONG: Its the last budget update before the Budget next year, so
LIPSON: But therell be no more adjustments if conditions deteriorate further?
WONG: This is the budget update that weve just handed down. I mean, the Government has said for some time that we will run the right fiscal strategy for the economic circumstances. The reason we want to bring the Budget back to surplus to give the Reserve Bank room to move is because the economic circumstances are low unemployment, an economy growing at trend, and an investment pipeline. In those circumstances, this is the right fiscal strategy.
LIPSON: But if revenue takes another big hit, then you would have to make adjustments to achieve that surplus, wouldnt you?
WONG: And we certainly have to date. We certainly have to date.
LIPSON: But between now and May?
WONG: These are hypotheticals. To date, weve taken savings not only to offset new spending, but also to offset revenue downgrades. And weve done so because the economic circumstances have meant thats appropriate.
LIPSON: The cuts to the Baby Bonus will save the Government about $500 million this year. Youd still have a surplus if you kept the Baby Bonus as it is now. Why cut it?
WONG: The Baby Bonus, I think, is reflective of the Governments commitment to making sure that family payments are sustainable. Remember, this is the Government that put in place Paid Parental Leave and the Schoolkids Bonus. So weve got a track record of supporting families doing the most important thing, which is bringing up kids and making sure they get to school and do all of those things. But ultimately, weve also got to make sure that the Baby Bonus and the family payments system is sustainable.
LIPSON: Should it be phased out then?
WONG: I think this is a sensible position weve got to. People do have upfront costs. When you have a baby youve got to buy the pram and the cot and the change table and everything else. Its sensible to have that support. But its also sensible to ensure that its sustainable over time.
LIPSON: Business is going to have to pay fourteen months worth of tax in twelve months. Why were they not consulted more about this? They do have some notice, but theyre upset that they werent given any warning.
WONG: There is a substantial amount of notice; its actually more than twelve months because its January 2014, and thats only companies with a very high turnover the largest companies. So, the reality is, these are budget decisions, and I appreciate people would always like us to give more notice of budget decisions. But some of these decisions are part of budgets and budget updates.
LIPSON: Is there a concern, though, that this sort of thing will impact on growth? Because businesses wont have as much money that year to invest?
WONG: I think its really important to remember were not asking business to pay more tax. Were asking them to pay tax in a different timeframe.
LIPSON: But that year they will pay more tax.
WONG: Theyre paying it monthly, like they pay GST, and obviously employees pay more often than that. Were not asking them to pay more tax, were just asking them to change the timing.
LIPSON: Senator Penny Wong, thanks for your time.
WONG: Good to be with you.
ENDS