Interview with Laurie Oakes
Today program
18 April 2010
SUBJECTS: COAG meeting; health reform; States to receive extra $13 billion in GST; cost of Victoria's health plan to the Commonwealth; Budget 2010-11; Independent Tax Review
OAKES:
Mr Swan welcome to the program.
TREASURER:
Good morning Laurie, good to be with you.
OAKES:
Do you think Kevin Rudd will get an agreement tomorrow?
TREASURER:
Well, Laurie we're going to work as hard as we possibly can to secure an agreement. We have been very constructive about this issue from day one. We made a commitment to the Australian people at the last election that we would act. We've had a Health and Hospital Commission report; we have consulted about that report. We've already met with the states and put forward constructive proposals. We're going to do everything we possibly can to ensure this reform takes place because it's urgent, it's overdue, and it has been in the too hard basket for far too long.
OAKES:
How much are you prepared to compromise? For example, mental health so far is not in the mix. Will you be putting money for mental health on the table tomorrow?
TREASURER:
Well, Laurie we're prepared to talk constructively with the states. But what we need is agreement on the fundamental structural reform. What we can't do is simply put a fresh coat of paint across a flawed system with big cracks in it. That's why we need the Premiers to sign up for fundamental reform; fundamental reform which ends waste and duplication, and fundamental reform that ensures the system is financially sustainable.
You see Laurie, if we don't fix up the financing of health it will be a financial disaster for Australia. That was highlighted in the Intergenerational Report that was produced at the beginning of the year. So first of all we need fundamental reform, and then we need to discuss the additional resources that are required to meet that reform
OAKES:
It's not just a matter of additional resources. The word is that the Federal Government is now prepared to make concessions on control of GST revenue that is earmarked for health. Is that so?
TREASURER:
Well, the most important thing is to dedicate a third of GST revenue to be spent on health. I believe the Australian people, when they're paying their GST, want to know that a third of that GST – a third of a dollar they pay in GST – is going to health. At the moment they can't be certain of that. That's part of the fundamental reform. But another part of the fundamental reform is the Commonwealth putting up its hand and saying it will take a greater share of health costs as we go forward. What that provides to the states is the certainty they haven't had for years. Premiers and State Treasurers have been coming to Prime Ministers and Federal Treasurers for years asking them to come to the party on these reforms. Those structural reforms are essential if we are to move forward. But a coat of paint over the cracks is not going to work.
OAKES:
But you say the key thing is a third of GST to be dedicated to health. Now Kristina Keneally has suggested you do that by having a pool rather than the money going to Canberra and then being put back. The states just put it in a pool which they control – but dedicated to health. Would that satisfy Kevin Rudd and Wayne Swan?
TREASURER:
Laurie, where we want that money to go is straight through to the front-line services, and that's what Australians can't be sure of at the moment. So at the core of our structural reform -
OAKES:
But if you had a transparent pool arrangement, would that work?
TREASURER:
Well, I'm not going to speculate about all the administrative arrangements, but what is absolutely important for the Commonwealth is to ensure that that money goes directly to health so that patients get the resources, that doctors and nurses get the resources that they deserve which they're not getting at the moment.
OAKES:
But is it necessary for Canberra to get its grubby hands on this money on the way through?
TREASURER:
At the moment Laurie what Canberra has given the states is a blank cheque; there's not enough accountability and there's not enough value for money. So we want to agree with the states on some fundamental reforms so the Australian public and taxpayers can be confident that the money that is dedicated to health is spent on health, and we absolutely want to ensure that it goes straight through to those front-line services.
OAKES:
But can you guarantee that if the states agree to dedicate a third of their GST to health that the Federal Government won't down the track claw back more GST for other purposes?
TREASURER:
What I can guarantee Laurie is we will give a very good deal to the states. We have already sat down with the states -
OAKES:
But that's not the question. That's not the question. The question is – is this a one off, or would you grab more, might you grab more, might another federal government grab more GST if it gets away this?
TREASURER:
No Laurie we're not in the business of grabbing more of the GST. What we're in the business of doing is ensuring that GST monies that should be spent on health are spent on health. That's what we're about. In addition, we're about providing additional resources to the states. We signed up to a health care agreement Laurie, with the states at the end of 2008 which gave them a 50 per cent increase in health funding. And also we've said we are now prepared to make more investments. But what we need is a fundamental commitment to that reform.
But also Laurie, the Federal Treasury has been talking to the states this week and giving them the updates on GST revenue over the next four years. And what I can say this morning is that because of our stimulus, and because of its impact on confidence, consumption has been quite strong in the Australian economy and that has produced additional revenues to the states of over $13 billion over the forward estimates, including $2-3 billion dollars a year. So additional resources are currently flowing to the states from the GST, in contrast to what is happening with Commonwealth revenues which are lagging behind because of accumulated losses in business particularly. So there's a drag on Commonwealth revenues, but GST revenues are flowing strongly to the states right now.
OAKES:
Now, does that good news you gave the state Treasurers during the week change for example – or should it change – John Brumby's resistance to parting with any GST money?
TREASURER:
Well, I don't know whether it will Laurie. You see, John Brumby with his 50/50 proposal is really putting forward a $30-odd billion smash and grab on the Federal Treasury. His 50/50 proposal would cost the Commonwealth $38 billion over four years.
Now John Brumby has a reputation as a reformer and he has a reputation as a former Treasurer. But I think John Brumby as a former Treasurer would never have signed up to a smash and grab like that on his own Treasury when he was a Treasurer, and the Commonwealth can't sign up to that smash and grab either.
OAKES:
Well, let's just clarify this – John Brumby's proposal is for the Federal Government and the States have 50/50 responsibility. Your proposal is for the Federal Government to have 60 per cent of responsibility for funding. Now John Brumby says 50/50 ought to be cheaper for you than 60/40. What's the flaw in his argument?
TREASURER:
Well, the flaw in his argument is that he won't dedicate the GST Laurie. And the fact is that his funding proposal would cost the Commonwealth Treasury an additional $38 billion dollars over the forward estimates. It is completely and utterly economically irresponsible.
OAKES:
Well, Mr Brumby – or rather his government today – is saying in The Sunday Age that there's a $1.4 billion dollar hole in your costings, that your plan would cost Victoria an extra $1.4 billion dollars. For example $268 million to meet Mr Rudd's emergency department waiting time target, an extra $560 million for the elective surgery targets, it goes on. Now are those figures accurate? Have you spoken to the Victorian Treasury about that?
TREASURER:
Well, funnily enough Laurie I don't believe the figure that is in the paper today has been raised by Mr Brumby with the Commonwealth. But I'd just reiterate the point that I made. We have been fair with the states in terms of the Commonwealth Health Agreement – a 50 per cent increase in funding. We're putting up our hand for 60 per cent of the cost of hospitals, 100 per cent of primary care. That will deliver to the states an extra $15 billion over the period beyond the forward estimates. These are very, very significant commitments from the Commonwealth but Mr Brumby seems to have it in his mind that he can conduct a smash and grab raid on the Federal Treasury. That is not reform.
First of all we've got to get the structure right – we've got to get the structural reforms in place - then we've got to put in place the resources to match. And that's what the Commonwealth is doing, which is why some of the Premiers are supporting these measures.
OAKES:
If there's no agreement at COAG tomorrow would the Federal Government really withhold the extra money for emergency services, elective surgery, GP training, aged care and the rest? Wouldn't that be penalising patients rather than punishing Premiers?
TREASURER:
Well, Laurie I don't want to pre-empt the outcome of the meeting, but I would reiterate this point and I made it before. We simply can't keep putting fresh coats of paint across a flawed system which has very big cracks in it. What we've got to do is get the fundamental reforms in place and then get the resources to match. That is what the Commonwealth is doing with this proposal which I believe has the strong support of the Australian people and of many of the state government officials will be in those meetings over the next couple of the days - and their leaders.
OAKES:
This is all pretty fundamental to the Budget that you're preparing at the moment that you'll deliver on the 11th of May. How to you intend to pay for the health plan – I think it's at least $3 billion dollars over the forward estimates – and start reducing the deficit and reducing debt?
TREASURER:
Well, Laurie we'll be applying our strict fiscal rules in the Budget, and the funding of the proposal that we have put forward so far will be all there on Budget night for everybody to see.
We take our fiscal rules very seriously, in particular the imposition of a two per cent spending cap when growth returns to trend and above and until the Budget returns to surplus. All those objectives of bringing the Budget back to surplus as quickly as we can, and the spending cap, go to the core of the application of our fiscal rules which we will meet when the Budget is delivered in a few weeks time.
OAKES:
We're just a few months out from an election so I assume that in your Budget planning you have to set some money aside for some generous election promises. How do you do that?
TREASURER:
Well, Laurie this won't be a typical pre-election Budget the likes of which John Howard used to deliver. The previous government used to go on a spending spree particularly every election year. We simply will not be doing that. This Budget will be underpinned by that strict fiscal discipline that I was talking about before, plus our priority for funding long-term reform within the Budget. And of course health is simply one of those most important priorities that we will be funding within the fiscal rules that I just outlined.
OAKES:
Now, you had good news for the Premiers because GST revenue has recovered quickly after the global financial downturn. What about revenue from company tax and other taxes that go into the federal coffers? Have they recovered in the same way, and does that enable you to make inroads into the deficit more quickly?
TREASURER:
Well, Laurie those revenues have not recovered like GST revenues have recovered. GST revenues are strong because consumption has been strong, because of the fiscal stimulus [that] underpinned confidence in the economy. But the accumulated losses of companies are going to be a very big drag on revenue growth into the future. Now there has been some improvement in revenues, but it is not like the improvement in the GST revenue because of those accumulated losses.
So we still face very difficult circumstances as we put this Budget together. And what underpins this Budget is our determination to impose that fiscal discipline, to meet those fiscal rules, and of course within that context to bring the Budget back to surplus as quickly as we can and as quickly as is responsible given our economic circumstances.
OAKES:
Now sometime in the next three weeks you'll be releasing the Henry Report on tax reform. I'm told there's at least a dozen things in that report that will be wonderful for the Opposition in terms of waging a scare campaign. How do you handle that problem?
TREASURER:
Well, I think Laurie we'll need to have a very mature discussion of the report of the independent inquiry which is headed by Dr Henry.
OAKES:
A mature discussion in the run up to an election – you're joking?
TREASURER:
Well, Laurie, the country needs long-term reform. We do need to have a discussion about how that is achieved. We've just finished having a discussion about the importance of health reform. We've seen how controversial that can be, but the Government comes to the table in good faith with the proposals that we're putting to the Premiers. And as we go forward, in terms of the report from the independent inquiry, we will outline our priorities. We will accept some of the recommendations, some will be unacceptable, and some will be there for further discussion as we go forward.
We are going to need a mature discussion about those issues. I'm hopeful of achieving it, but given the behaviour of the current Opposition Leader and the rest of his party, they may not be part of that mature discussion.
OAKES:
As I said we're in the run up to an election. If Kevin Rudd doesn't win tomorrow, won't he branded as a Prime Minister who can't get the big things done, who can't get reform? After all he's failed totally on the emission trading.
TREASURER:
Well, Laurie we've put many fundamental reforms into the system over time and we are determined to reform the health system. If one or two state Premiers won't come on board tomorrow, that certainly will not deter the Government from pursuing health reform, because it goes to the very core of our future economic prosperity and the quality of life that so many Australians hope for when it comes to their health care. So whatever happens tomorrow we will continue to pursue this reform because it goes to the heart of the national interest, and we will simply not let the political interest of one or two Premiers stand in the road of achieving those national interest objectives. So we…
OAKES:
The threat is that you'll have a referendum on this. If a referendum campaign is run with an election campaign, it will be a civil war in the Labor Party won't it? Rudd versus Brumby. How can that help you?
TREASURER:
Well Laurie, the Federal Government is determined to put the national interest first, not the political interest of any particular Premier or any particular political party. Health reform goes to the very core of economic prosperity and the quality of life of all Australians. The Australian people expect a government to deal with this issue. It's been in the too hard basket for far too long. The Prime Minister and the Government are absolutely determined to keep moving forward on this issue.
OAKES:
Labor fighting itself in an election campaign, that's Tony Abbott's greatest dream isn't it?
TREASURER:
Laurie the national interest for us comes first. Others will put their political interests first, but we're determined to achieve this reform.
OAKES:
Mr Swan, we thank you.
TREASURER:
Good to be with you.
