Sky AM Agenda Video and Transcript - 30 April 2013

On Sky AM Agenda, I spoke with host Kieran Gilbert and Liberal Senator Simon Birmingham about the drop in federal government revenue, and the challenges this poses for policy costings on both sides of politics.

Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
30 April 2013

TOPICS:                                New revenue and budget forecasts, Coalition plans for cuts, the challenging fiscal environment.

Kieran Gilbert:                   This is AM Agenda, thanks for your company. With me now are Liberal front bencher, Senator Simon Birmingham and Labor MP, Andrew Leigh. Andrew Leigh thanks for your time. I’ll start with you if I can. On the Budget, Joe Hockey is saying, well, the Disability Insurance Scheme, if the Government is going to pursue a Medicare style levy it’s only going to fund a fraction of the overall cost. You’re going to have find a lot more than just a levy, aren’t you?

Andrew Leigh: Well Kieran, we’ve been very clear that there are significant pressures on the Budget and that’s because of these surprising international circumstances that have seen commodity prices come off but yet the Australian dollar stay high because of the demand for our bonds. So we’re looking at a range of different ways of making the necessary saves, raising the additional revenue required for something like Disability Care Australia, which I know so many of your viewers are passionate about. Australia shouldn’t be the kind of country in which someone with a disability only gets to take one shower a week and we need to find space in the Budget to do that.

Kieran Gilbert:                   A lot of economists believe that a levy is the right way forward. The Productivity Commission recommended it; Sorles Lake from the Bank of America, Meryl Lynch also believes it. If you’ve got an insurance policy, you need a premium… do you see the merits in that case? And I suppose, why did the Treasurer ever rule it out in the first place?

Andrew Leigh:                   Well, I think in an ideal world, consolidated revenue is where you draw on for all of your schemes, but as we’ve seen this substantial hit to revenues, revenues down from 24% of GDP in the mid-2000s down to now 22% of GDP, that’s a substantial reduction. You’ll hear from people on the other side of politics that the dollar amount of revenue coming into the Commonwealth has gone up. But the fact is it hasn’t kept pace with the demand for things like the pension, things like health expenditure, and of course a growing population. So, that’s why we’re in the position we’re in now.

Kieran Gilbert:                   Senator Birmingham, “Every Australian Counts”, that campaign on a Disability Insurance Scheme believed that a levy is the way forward, what do you make of this debate?

Simon Birmingham:         Well Kieran, we want to see the NDIS implemented, and we’re very concerned about the fact though, that this Government has now taken it to a stage of having ruled out a levy, is now considering a levy. And this is of course sadly politicising something that should have been done in a far more sensible way. We have for a long period of time called for a Joint Parliamentary Committee that could work in a bipartisan way, to get the NDIS implemented and deal through these issues. Instead now, at the eleventh hour as the Government is creating its own Budget crisis, and it is a crisis of its own creation because the truth is, though Andrew wants to talk about revenues from a decade ago, the truth is this Government will still have more money this year than they had last year. They still will in fact have around $25 billion dollars or so more in revenue this year than they had last year. So, revenue is significantly up over the year. It is the Government’s spending that is the problem and it’s a tragedy the NDIS has been caught in the middle of this vortex.

Kieran Gilbert:                   That’s the point that was made repeatedly by Joe Hockey this morning and yesterday and Senator Birmingham just now on this revenue increase of 7.6% year on year. So you’re saying that spending has outstripped that. Is it time politicians, policy makers, re-think the way they do budgets?

Andrew Leigh: But Kieran, the point I was making was that demands of our society are outstripping that. The health expenditures have gone up…

Kieran Gilbert:                   So do expectations have to change?

Andrew Leigh: Well, I think we have to make responsible savings measures. Ever since the global financial crisis, every new spending measure Labor has made has been offset by an appropriate savings measure. But it’s just not helpful to talk about the dollar amount of revenue. What you need to focus on is revenue as a share of GDP because that brings into mind the increase  in the demand for health expenditure, the increase in the overall population, and so taken as a share of GDP, our tax revenue is well down on what it was in that boom period of the Howard years.

Kieran Gilbert:                   Senator Birmingham, that specific point there, if you could respond to that specific point? The revenue as a share of GDP as opposed to simply the dollar amount which has been referred to the last day or so.

Simon Birmingham:         Well Kieran, what is a good thing is that the Australian economy has kept growing and that’s why we should be in a surplus position, and when the economy grows, if it grows at a particular rate, ahead of the rate that taxation grows, then the revenue as a share of GDP will shrink. That is actually a good thing if that happens and governments should be able to manage in those circumstances. Revenues are still growing, that is an absolute fact. What is a complete bunkum, utter untruth, is when Andrew says that the Government has banked savings to offset new spending initiatives. That’s just not true. The Government has claimed to have revenue from its mining tax, made all these spending decisions based on it and not had the revenue there. The same thing is unfolding with the carbon tax. We see in other areas where the Government has shuffled around the timing of when it’s going to get its revenue from spectrum sale. So, this Government has played a lot of games on the revenue side, has made a lot of assumptions on the revenue side, and those assumptions have simply been wrong. Their problem is they’ve made all their spending decisions based on assumptions of their own making.

Kieran Gilbert:                   I suppose you get to the Treasury forecasts in that context, why are they so far out?

Andrew Leigh: Well revenues are a difficult thing to forecast, Kieran. I mean, we saw errors in the opposite direction under the Howard years. This isn’t because people are behaving in a mendacious way, it’s simply that revenues are challenging to forecast. But Kieran, we will continue to find those responsible saves. We’ve found $100 billion of them in past budgets. Let me just give you a couple of examples to answer Simon’s comment: means-testing the Private Health Insurance Rebate, means-testing the Family Tax Benefit Part B, means-testing the Baby Bonus. All of those of course, opposed by the Coalition who when we reduced the amount of the Baby Bonus Paid to second and subsequent children, compared it to China’s One Child Policy. So the Coalition also need to recognise that the current fiscal condition is very challenging for them, for example, they need to recognise that if they’re going to fund a parental leave scheme with a levy on company tax, that the huge reduction in company tax revenues is going to have an impact on that budget costing.

Kieran Gilbert:                   Let’s get to Senator Birmingham on that point, that reality that we saw yesterday. It is going to affect the Coalition if in government and on that specific policy.

Simon Birmingham:         Kieran, we don’t pretend that it’s going to be easy to get this budget back into shape. Especially not after the type of spending decisions the Government has taken. We know it will be hard, that’s why we’re being up front about having to make some difficult decisions. We know that it’s not popular to say we’ll axe the SchoolKids Bonus. Those people who are getting that money in the bank don’t like the fact that we’re going to cut that. But we recognise these types of savings decisions must be made and we will make those difficult decisions just as we outlined in our costings at the last election. We’ll outline them again in our costings at the next election. Most importantly, we will get the size of the bureaucracy under control as well. We’ve seen phenomenal growth in the bureaucracy, and I know it’s in Andrew’s own electorate there much of it. But we’ve seen huge growth in the size of our health bureaucracy, our education bureaucracy, despite the fact they don’t run any hospitals or schools. These are areas where Government has to keep a really tight rein on spending.

Kieran Gilbert:                   Senator Birmingham, Andrew Leigh, thank you for your time this morning. We’re out of time. That’s all for AM Agenda.

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