Doorstop Interview
Toronto, Canada
27 June 2010 (Australian Time)
SUBJECTS: G20 meeting; Labor leadership; Resource Super Profits Tax
TREASURER:
It's a great privilege to be here at the G20. This is where major economies take decisions about the future of the global economy. It was the concerted action by G20 economies that avoided a great depression. Those decisions that were taken over the last couple of years were absolutely critical. But you have to move forward. Global growth is uneven. There has to be a reform agenda as we go forward to ensure that we don't get a repeat of the past. So I'm looking forward to a constructive dialogue with G20 leaders over the next 24 hours about those challenges.
Also today I've been here talking to business leaders – talking to business leaders about the strength of the Australian economy, about how the Australian economy grew when most other developed economies went backwards. Those underlying strengths make Australia a great place to invest. I had a good discussion with business leaders about all of those issues. When I come to the G20 other leaders come to me and say, 'why is the Australian economy so strong?'. And the Australian economy is strong because it has put in place over a long period of time fundamental reforms. We know in Australia that you can't always just rest on your laurels, which is why the Government has moved to modernise our tax system, to invest in infrastructure and education, and to put in place settings which will maximise the opportunities which will flow to Australia from the Asian Century.
JOURNALIST:
When you talk about those successes Australia's had and perhaps the leaders will come to you and ask you 'well why did you change the Prime Minister?'. What will you be telling them this weekend?
TREASURER:
Well when I'm talking to people internationally, what I talk about, about Australia, is the strength of our economy. Of course they'll ask me about recent political changes in Australia and I simply explain the fact that there was a mood in the Parliamentary Labor Party for a change of leader. It was something that many felt painful but necessary.
But what I then go on to talk about is the strength of the Australian economy because the Australian Labor Government put in place a set of policies that meant our economy grew when other economies went into recession. We were one of only two economies that didn't go into recession. That's a very substantial achievement for Australia, and a very successful achievement for our political leadership at the time, the political leadership of Kevin Rudd. But what I do say to people is that the Parliamentary Party took a decision and they changed the leader and the Government is united behind our new Prime Minister, Julia Gillard.
JOURNALIST:
Mr Swan, there's been a definite bounce in the polls published over the weekend since the leadership change, though there is a bit of a distaste among some people over what happened to Kevin Rudd, particularly in Queensland. As the most senior Queenslander in the Government now, how will you try to convince your home state that it was the right decision and that it wasn't a Machiavellian assassination of the former Prime Minister?
TREASURER:
Well these are decisions that I believe all Caucus members took in the national interest. It's not about the individuals involved – it's about the policies and it's about the Government. I took the view that the Party in the community was best served by everyone uniting strongly behind a new leader. I believe that people understand that. I believe that people understand the need to reinforce our economic strength, to get behind the Party which is determined to invest in health and education, and I think people understand the contrast between the Labor Government under Julia Gillard and the approach of Tony Abbott which is to bring back WorkChoices and take an axe to health and education spending.
JOURNALIST:
Given the bounce in the polls do you think that the Government should go to an election within days, weeks, to maximise that?
TREASURER:
Look I'm here at the G20 talking to people about what must be done to strengthen the global economy. That's very important. And when I'm here internationally talking about those things I'm not really going to be speculating about opinion polls in Australia.
JOURNALIST:
But you must have nonetheless been pleased to see that bit of a bounce?
TREASURER:
It's not really about opinion polls. What it's about is getting the policy settings right for the future of Australia. We're here now talking about how we deal with global financial imbalances – how we put in place a sustainable framework for strong and balanced global growth.
What the Government is focussed on is the same things domestically. The performance of the Australia economy has been strong – the strongest of just about all developed economies - but we can't rest on our laurels. What we're saying to the Australian people is that we have a framework for the future to invest in quality services and health and education. Tony Abbott wants to take the axe to those. What we have is a program to deliver tax cuts to Australians who are doing it tough when it comes to their living standards. We have a framework in place to modernise our economy – they're the sorts of things we're talking about.
JOURNALIST:
You paid tribute to Kevin Rudd earlier in your speech today for fighting to make the G20 the pre-eminent global economic forum. Do you think he'll be missed here this year?
TREASURER:
There's no doubt that Kevin Rudd was popular amongst many of the leaders here – he did a terrific job through those years when we were fighting to entrench the G20 as a replacement for the G7. That was a very substantial achievement and that's something that he did and we did in conjunction with other countries such as Canada. It was particularly appropriate to say those words today because Australia and Canada were to the forefront of the campaign, if you like, to entrench the G20.
The other thing about it is that Australian and Canada are two countries that have come through in better shape than just about any other developed nations through this very difficult period.
But what Australia needs to do, and this is what I've been talking to business leaders about and I said in my speech again today, is that we have to move forward with even more emphasis on strengthening and broadening our economy to support jobs and to support small business whilst also having the capacity to put in place those essential services that Australians depend on.
JOURNALIST:
You talked to the leaders of Indonesia and Vietnam today. What did you discuss with them?
TREASURER:
Look I had a broad conversation most particularly about the G20 agenda, as we do. And I'll be talking to more leaders as we go through this afternoon and through this evening and tomorrow. This is a really good opportunity. The thing about the G20 is that it gives Australia a seat at the decision making table when it comes to global economic affairs. This is something that we did not have before. That's why it's so important for Australia to utilise these opportunities to talk to world leaders about all of the issues that are on the agenda, but also more broadly about other issues that might be on their mind.
JOURNALIST:
Deputy Prime Minister, some commentators back in Australia have said that you let down Kevin Rudd as the Minister of the main carriage of overhauling the tax system by cherry picking the mining tax proposal in the Henry Tax Review and then making Kevin Rudd essentially pay for it. Is that right?
TREASURER:
Well I accept my responsibility in all of the decisions that the Government has taken – economic and otherwise. As the Treasurer you are involved in every decision and you can't pick and choose. I accept my responsibility for all of those decisions that have been taken by the Government.
But what isn't right about what you just said that there is some cherry picking. What we did do was a comprehensive response to the Henry Review and what we took up was the central thrust of the Henry review. That is that there should be lower corporate taxes and that there should be a modernisation of the royalties regime which was ramshackle and which just discouraged investment in mining.
So we took up a central thrust of the Henry Review that was that Australia should become a more attractive destination to invest by cutting business taxes, and that is what we were proposing to do and are proposing to do with the revenue from the Resource Super Profits Tax.
JOURNALIST:
How long before we can get a definite decision on an alternate proposal on the mining tax?
TREASURER:
The Prime Minister, Julia Gillard, made it very clear in her press conference on the day that she was elected that she would open the door if the miners would open their minds. I was heartened by the response from sections of the mining industry who indicated they would come to the table for further discussions and negotiations. What I've also said is that we don't intend to conduct those discussions with or through megaphone diplomacy.
JOURNALIST:
Mr Swan you told the forum that the mining tax had no bearing on the Budget at all but the forward estimates say that it will earn $12 billion for the Government; it's the basis on which you're cutting the corporate tax rate, changing superannuation, and introducing infrastructure spending. If it's is going to be rebuilt from the ground up as many in the mining industry want how can there be a guarantee that the money will still flow through? And does that mean that the tax cuts and the superannuation and the infrastructure could be changed in some way?
TREASURER:
I think you might have been present at the press conference I gave when I responded to the Henry Review and the position hasn't changed since that day on the 2nd of May. What I said was that the revenue from the Resource Super Profits Tax would be used to fund the cut in business taxes in the corporate rate, to fund infrastructure investment particularly in mining regions and to boost superannuation. And I said to the extent that those revenues were not available then choices would have to be made between those alternatives. There is no impact on the Budget bottom line given the framework I've just outlined. We are returning to surplus in three years, three years early. I think everyone should be really clear about this, particularly when we're here at the G20.
We are returning to surplus before any other major advanced economy - in three years, three years early. We have the lowest net debt of any advanced economy by a country mile and the central thrust of that Budget was fiscal consolidation. A fiscal consolidation that is bringing us back to surplus in three years. And I said that we would not take any decisions which would impact upon that central objective. But I then went on to say was that we had a raft of proposals arising from Henry and that they would be funded from the revenue from the mining Super Profits Tax. If that revenue was not necessarily available then there would have to be choices made amongst those alternatives. So there is no impact, whatsoever, on the Government's plan to bring the Budget back to surplus in three years.
JOURNALIST:
You talked up today on the importance of G20, and we also have APEC of course. What do you see as the future for the idea of an Asian Pacific forum or community?
TREASURER:
Well, APEC or the Asia Pacific Community?
JOURNALIST:
The APC?
TREASURER:
Oh I see. Well that will be something we will have to deal with as we go forward from here. At the G20 we are dealing essentially with a different body. The G20 is about global economic coordination, principally. The Asia Pacific Community is a broader concept which encompasses matters beyond the scope of purely economic decisions.
JOURNALIST:
Can you see it happening?
TREASURER:
Well that's something that we're working on and that we'll continue to work on.
JOURNALIST:
Mr Swan, can I clarify – does this mean that the corporate tax rate, the superannuation and the infrastructure spending could be reworked if the mining tax doesn't generate as much income as anticipated?
TREASURER:
Sandra, if you read my transcript from the press conference I referred to before, I said that on the day I announced it.
JOURNALIST:
Can I say just ask - with the G20 do you expect a consensus about this idea of stimulus versus debt reduction? Or will it be a case of each country to its own?
TREASURER:
I don't see it as a case of one or the other. In fact, it will depend on circumstances and what region in the world you are in, and what country in the region in the world that you are in. The fact is that we do need fiscal consolidation in many countries, particularly developed countries that are in deficit. The pace of that consolidation will depend upon the circumstances of those countries and the nature of that consolidation will differ between countries.
Many countries will put in place fiscal consolidation plans which will deal with structural issues in their Budget, and they will do it from a medium term perspective. Other countries because of current circumstances may take other decisions to cut spending in different ways right now. That depends upon their individual circumstances. When it comes to the developing world there may well be a case for structural reform but not to deal with the problems of fiscal consolidation but to lift the growth capacity of those economies. So what you have to understand here is that there is a balance between fiscal consolidation on the one hand and growth, and a balance between the type of fiscal consolidation on one hand and the type of structural reform on the other that is required.
JOURNALIST:
With respect with the mining resource tax, this is something that Canada is paying close attention to as well, what is the likelihood of, given that the petroleum tax had taken two years of consultation with industry, what is the likelihood of coming to some sort of resolution with the mining industry before the next election?
TREASURER:
Well once again I think if you go back to my remarks on the 2nd of May I said that the Government would be engaging in a consultation process that went over a significant period of time, which you do with any new tax and as was the case with the PRRT. What we're dealing with here is the first stages of that consultation process and general architecture of the tax.
I've said repeatedly that we'd like to see it resolved as soon as we possibly could. But even with any major tax reform, and it was the case with the PRRT, the more detailed consultations about that tax went on for a long period of time as you've just indicated. That is how any tax reform takes place in Australia.
