Interview with Barrie Cassidy
ABC TV Insiders
16 May 2010
SUBJECTS: Return to surplus; Budget 2010-11; Liberals' non-Budget-in-Reply; Resource Super Profits Tax; consultations with resources sector; action on climate change; polling
CASSIDY:
Treasurer, good morning. Welcome.
TREASURER:
Good morning, Barrie. Good to be with you.
CASSIDY:
Peter Costello says that the trick in your Budget was to focus attention on the bottom line three years from now, and not talk at all about the $50 billion plus deficit that exists right at the moment.
TREASURER:
Well Barrie, we're bringing the Budget back into surplus in three years and three years early - the best performance of any major advanced economy, and we're halving peak debt.
We are making very substantial progress here Barrie, because just remember the circumstances one year ago. We had a very bleak outlook globally, a bleak outlook for Australia. And what Australia has achieved in that period is extraordinary - the fastest growing major advanced economy. It's a very good outcome. The economy is now coming back to above-trend growth.
And what we are doing in this Budget is what we said we would do last Budget, which is bring the Budget back to surplus as quickly as we responsibly could. We're doing that with the imposition of our very strict fiscal rules, and it gives us an outcome which is better than many other advanced economies - one that is the envy of the world with an unemployment rate of 5.4 per cent.
CASSIDY:
But you are nevertheless asking to be re-elected on a promise rather than the reality.
TREASURER:
Well, Peter Costello and everybody in the Liberal Party said that this couldn't be done. Last year they were saying that our forecasts were too optimistic. We were being criticised very clearly then for all of our forecasts.
Australia has done well. It's done well because we put in place stimulus. And what stimulus has meant is that we haven't had the destruction in our economy of our skills base and our capital base. And as we go forward to recover – to maximise opportunities that will come our way from a return in global growth – we're paying down debt. That's exactly what we said we would do last year. And it's an achievement of which the Government is very proud, because look around the world – unemployment in the US of 9-plus per cent. Unemployment in Europe in some countries as high as 16 per cent. A great outcome for Australia, and a really good foundation that we can build for recovery as we go forward, particularly in this region given that this will be the strongest growing region in the global economy.
CASSIDY:
Well, the Coalition has announced cuts. They're going to make big cuts to the public service and Joe Hockey plans to announce even more cuts on Wednesday.
TREASURER:
Barrie, they didn't announce anything. It was the only Budget Reply that didn't have a Budget Reply in it that I've ever seen. It was an extraordinarily weak reply. We've got no costed proposals. We've got no pathway back to the surplus. And this is extraordinary because on your program last week Joe Hockey said we should be coming back to surplus in four years. We're coming back in three years, three years early. And in their budget reply they couldn't say when they were coming back to surplus. And they said –oh, look, wait a couple of days until Joe goes to the Press Club. This is an extraordinary approach to economic affairs. It just shows how unqualified they are to handle the economy.
CASSIDY:
But they're not saying they'll do it all in a day. They're promising spending cuts on Wednesday. What do you expect then?
TREASURER:
Well, we've already got from Tony Abbott commitments exceeding something like $15 billion. So they've got to somehow fund that next Wednesday, and then on top of that try and chart a course forward to bring the Budget back to surplus earlier.
CASSIDY:
When Tony Abbott said that he's decided to make this Super Profits Tax on the miners the main focus of the election, did you really expect that the miners would resist it to the extent that they have?
TREASURER:
I've been surprised by some of the more extreme commentary from some sections of the mining industry. We've got to really strip this back and look at what we're doing here, because we have a recommendation to replace the royalties system which is very different in different parts of the country. State governments are jacking up royalty rates from time to time. That creates a lot of uncertainty.
The recommendation we got was to get rid of the royalties system and put in place a Resource Super Profits Tax, because what royalties do is they provide a return to the Australian people. We own those reserves - those mineral reserves - 100 per cent, and for the use of those reserves miners have always paid a royalty. Now, what the suggestion to us is, and we're doing this, and we believe in it very strongly, is putting in place a Resource Super Profits Tax that will encourage investment as we go forward, but importantly, give the Australian people a fair return for the mineral resources that they own, because we haven't been getting that fair return over the last decade.
A decade ago royalties were $1 in $3 of mining profits. Now they're $1 in $7. The Australian people have been short-changed. We think we deserve to get a fairer return so we can fund investment in other areas of the economy, to cut company taxes, to invest in infrastructure in regional areas and to invest in superannuation. And that's exactly what the economy demands now.
CASSIDY:
But every Australian also looks at the share prices. And every superannuant has a stake in that, and they've worried surely that if the miners are less prosperous so they will be.
TREASURER:
Well, this is a profits based tax. It will not make the miners less prosperous. At the moment the royalty regime really punishes a lot of miners whether they make a profit or not.
And, of course surely everybody recognises that the biggest project in Australia's history - that has been approved at the end of last year, the Gorgon project, a $43 billion project - has been approved under a 40 per cent rent-based tax - the PRRT.
CASSIDY:
So I gather then, you're going into negotiations with about 80 companies as I understand it. But how much room is there for compromise? Does the 40 per cent rate, for example, is that a non-negotiable rate?
TREASURER:
We have said that we want a 40 per cent rate. We are committed to a 40 per cent rate. I have said, and we said on the day we launched the Independent Tax Review, that we would be genuine in our consultation and discussion with the mining industry. We said there would be generous transitional provisions, and we would discuss all of the matters and issues they had with the tax in detail, through the consultation process.
I am taking that very seriously. But the Government's bottom line is that the Australian people have not had fair value here. The miners know in their heart of hearts that they are going to have to pay a bit more because the royalties regime has not kept pace with the value of this resource which is 100 per cent owned by the Australian people.
CASSIDY:
When you say you’re negotiating, what are you negotiating about? Will you negotiate about what actually constitutes a super profit for example?
TREASURER:
I'm not going to pre-empt those discussions and detailed outlining of what we're intending to do, and the response that will come from the mining industry. I do this in good faith. The Government is not looking for anything other than a very fair return for the Australian people on the one hand, and strong investment as we go forward Barrie.
We recognise the economic imperative to deal with mining boom mark II which presents such great possibilities for all Australians but also some challenges. And that's why we will direct every dollar from the Resource Super Profits Tax into cutting the company rate for all the companies, giving a real boost to small business, unlike Tony Abbott who wants to jack up the company rate by 1.7 per cent on all companies over $5 million.
CASSIDY:
But when you talk about transitional arrangements though. I gather that means that you will talk about taking a different approach to existing ventures, as opposed to new ventures?
TREASURER:
Well, we've said that we will provide generous transitional provisions for existing projects. You see, what we are doing is removing an existing tax, effectively a royalty, and replacing it with a new one which is a better tax, a more efficient tax, one that will grow the industry in the long-run. But some very profitable ventures will pay more, and they do recognise privately that they do need to pay a bit more.
We want to sit down and talk to the industry about all of these issues. I don't intend to pre-empt that discussion on national television. But we're genuine in our approach.
Economic reform demands this reform. When the PRRT was introduced over 20 years ago the mining industry was saying the same thing publicly then about how the whole roof would fall in, it would discourage investment. This is simply not true. There is a big fear campaign coming our way, no doubt about that. But the Government has a deep resolve to get the fair value for the Australian people of their mining resources and at the same time do the right thing by investment and the future of the economy.
CASSIDY:
Now Tony Abbott spooked [inaudible] very quickly when he started talking about a great big new tax on everything in relation to the ETS. He is now saying that if you tax low value commodities like phosphate, gravel, sand, then that will put up the price of housing. Is that an area where you need to take a second look?
TREASURER:
Well this is just ridiculous because it just proves he hasn't got a clue about the tax. The fact is many of these low-value commodities might do much better in a Resource Super Profits Tax than they currently do. So we're talking to them to see whether they might be better off or not. Low-value commodities are punished, absolutely punished, by a royalty regime.
CASSIDY:
I mentioned the ETS. Isn't it true that the collapse of the Copenhagen talks, and your decision to defer the ETS, meant that you saved a lot of money in the Budget? How much exactly did you save because of that decision?
TREASURER:
$650 million. Look, sadly those reports on Saturday are just plain wrong, Barrie. The truth is that we saved $650 million which we're putting into a Renewable Energy Future Fund to build on what we are doing in the area of renewable energy - massive investments we've already made there. Those reports simply don't understand the nature of the accounts that we've put forward. It is very...
CASSIDY:
$650 million now, but how much by 2012?
TREASURER:
It's $650 million now. All of that has come out, and over the forward estimates it's going into that Renewable Energy Fund.
CASSIDY:
So you're saying that wasn't a motivating factor when you decided to defer the ETS?
TREASURER:
Absolutely not. No, absolutely not. We are committed to an Emissions Trading Scheme. There's no government in Australian history that has been more committed to doing something about climate change than us. I'll just take you back through the history. We had a Green Paper. We had a White Paper. We had comprehensive modelling. And we had legislation. We pushed the legislation through the Parliament on the three occasions. We were denied the legislation in the last few days by one Tony Abbott. And the fact we don't have an Emissions Trading Scheme right now is the sole responsibility of Tony Abbott.
CASSIDY:
Okay, you say you allocated $600 million to climate change. You gave $1.2 billion to sport. So winning gold medals in London is more important than global warming?
TREASURER:
Well, we didn't do an increase of $1.2 billion in sport. We renewed some programs in terms of elite sport that were running out of funding and that the previous government did not have future funding in the forward estimates for. We do that all the time. So it looks like there is a substantial increase because there has not actually been a renewal of the funding. The renewal of the funding for elite sport is nothing like that Barrie, absolutely nothing like that.
CASSIDY:
Are you at all embarrassed that Ross Garnaut says that China is exercising leadership on climate change in a way that we are not?
TREASURER:
Well Barrie I have attended many G20 meetings with representatives from the G20, and Australia has been very much to the fore of discussions on climate change at both Finance Ministers' Meetings and Leaders' Meetings. And there is probably no government in the western world that has done more to make emissions trading a reality, when there was nothing in place when we came to power. We have done an enormous amount and we are still doing an enormous amount.
CASSIDY:
Ross Garnaut raises the question – why can't we at least do as much as China?
TREASURER:
Well, we have to do more in energy efficiency because we have been denied the Emissions Trading Scheme. That is the situation we are in now because Copenhagen did not go forward in the way in which we'd all hoped and anticipated.
The Government is bitterly disappointed about that outcome, which is why we are now moving more aggressively in the area of energy efficiency on the one hand and renewable energy on the other. We already have billions of dollars invested in renewable energy, and we're stepping that up again in the Budget.
CASSIDY:
But don't you just think in your private moments that perhaps why the youth vote is deserting Labor – according to the GetUp research – it's because you deferred the ETS?
TREASURER:
Well, I'm sure there will be many out there that are disappointed we couldn't get the ETS through. And the Government is bitterly disappointed by the fact that the Liberal Party decided to destroy it. Bitterly disappointed by that, and also disappointed by the outcome in Copenhagen.
But our resolve to act, and our resolve to take further measures in addition to an emissions trading scheme is still there. And we are going to work on those issues as hard as we can as we go forward, particularly towards the end of the 2012 - the end of the Kyoto period - when we will have a better idea about whether an emissions trading scheme can be got up in that environment.
CASSIDY:
But maybe will you have to do something before that, because I'm sure you are aware about all the chatter that's going on now, the conversations that seem to be happening all over the place about Kevin Rudd's leadership.
TREASURER:
Well I don't think Kevin Rudd when he became Prime Minister ever thought that every day it would be easy. He has great commitment to this country and a fantastic work ethic.
Great commitment to the country and fantastic work ethic. But over and above that, just look at the record. What we've done in a very short period of time – saved this economy in the middle of a global recession, saved tens of thousands of jobs, tens of thousands of small businesses. Historic reforms to the health and hospital systems, historic reforms to the pension system, to the superannuation system, and nation building investments, in infrastructure, and education. I think it's a pretty good record.
CASSIDY:
It's not a bit of positioning going on here though is there? Laurie Oakes' column yesterday suggests that if Kevin Rudd was to go, Julia Gillard would not be the only alternative. And he quotes a Labor insider as saying that you, Wayne Swan, did not put your leadership baton up for sale. It's still in your knapsack.
TREASURER:
I don't have one in the knapsack at all. My ambition is to be a successful Treasurer of this great country and preside over prosperity as we go forward and that's the only ambition I have.
CASSIDY:
Wayne Swan, thanks for your time this morning.
TREASURER:
Good to be with you.
