Post Budget Remarks - Transcript

Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
15 May 2013

TOPICS:               The Budget

Andrew Leigh: The Budget that was handed down last night lays the framework for what will be a very clear choice for Australians come September. A choice between a Labor Government that’s chosen to make responsible saves in order to invest in road infrastructure, in better schools and in disability care, and the Coalition which must either back in all of our responsible saves and then make more cuts of their own, or else, keep their cuts in the top drawer as they’ve been continuing to do. I think Australians will recognise that the high dollar has been a big hit to the government revenues and they will recognise too, that it is time for Tony Abbott to stop saying yes to every special interest and no to responsible savings measures, back in the Government’s saves and then be clear about how he will balance his budget. Happy to take questions.

Journalist:          Is the Treasurer being again, too overly optimistic? With the carbon tax and the mining tax in this budget, there’s been $13 billion lost out of those two initiatives together, and then the Treasurer is still forecasting a return to surplus in 2-3 years?

Andrew Leigh: Our forecasts are based on the best available data and what we saw over the course of last year was a once-in-fifty-year episode in which nominal growth for a sustained period was below real growth and that’s driven in large part by the high Australian dollar. Australians recognise, I think, the high dollar hurts our revenues. But our choice then is to make the responsible savings that you saw in last night’s budget or take the alternative that Tony Abbott would have of cutting to the bone.

Journalist:          The believability factor here is going to be a big issue with four months out from the election. Last budget, Treasurer Wayne Swan promised a surplus, this year we’re getting a $19.4 billion deficit. How can voters believe Labor?

Andrew Leigh: What you’ve seen from Wayne Swan and what you never saw from Peter Costello is a willingness to have a serious economic discussion with the Australian people. I mean, when you look at the great Australian Treasurers, Paul Keating and Wayne Swan, each of whom won the Euromoney Finance Minister of the Year Award, they’re people that were willing to talk about nominal and real growth, to talk about the impact of the high Australian dollar and to talk about trade-offs. That’s why I think Wayne Swan is a terrific Treasurer and it’s why Joe Hockey hasn’t measured up, because Mr Hockey talks ‘age of entitlement’, but when it comes to making tough decisions he compared our modest changes to the Baby Bonus last time round to China’s One Child Policy. This is a guy that just can’t make the serious trade-offs that are required to be a Treasurer. He gets rolled by shadow cabinet every time he tries to make a responsible saving, and then as he said last night to Laurie Oakes, “I’m a team player”. Well, that doesn’t cut it when you have big revenue downgrades on top of the $70 billion dollars the Coalition starts behind.

Journalist:          How do you think those in your electorate will react to the axing of the Baby Bonus? Do you think it will be met well in the electorate?

Andrew Leigh: I think there will be a recognition within my electorate that we have to make responsible saves and that changing the Baby Bonus and so it’s targeted to people receiving Family Tax Benefit Part A and comes down to $2000, is a responsible savings measure. We know that the Baby Bonus didn’t have a big impact on fertility. A Melbourne University study coauthored by Mark Wooden had the cost of each new baby induced by the Baby Bonus at $150,000 a year. So, this was never good public policy and what we’ve done by means testing it and bringing the amount down has been in the spirit of the means-tested, targeted, Australian social safety net which has served Australia well for decades.

Journalist:          How can you rectify scrapping the Baby Bonus but keeping a cash hand-out like the SchoolKids Bonus?

Andrew Leigh: The SchoolKids Bonus is targeted at those school expenses. It comes regularly in the beginning of each school term and it’s designed to encourage Australians to invest in their child’s education, to help ends meet around uniforms, books, we know school is expensive and we want to make sure no child turns up on the first day of school without an essential textbook, exercise book or uniform. The SchoolKids Bonus does that in a targeted way.

Journalist:          The mining tax raised ten per cent of what was originally forecast. Surely now is the time to rethink the design?

Andrew Leigh: When you look at the Petroleum Resource Rent Tax over its 25 year history, if you’d analysed the PRRT one year in, you would have said, “well this tax isn’t raising what we wanted it to raise”. But over the course of the last quarter century, the PRRT has bought in, I think, around $25 billion. The Minerals Resource Rent Tax depends on commodity prices and it also depends on the deductions that mining companies are making, and that will change with the point of the cycle. But anyone who says going back to the old royalties regime is better than a profits based mining tax has got rocks in their head. There’s no sensible economist that would argue that.

Journalist:          But, you’re a sensible economist, no doubt you’d agree with me in saying that, surely you would agree that there’s a structural flaw here that needs to be rethought into the future because Wayne Swan’s predictions about what that tax will raise are again, very overly optimistic over the forward estimates.

Andrew Leigh: But Laura, I don’t think it’s a structural problem that we’re not forecasting mining tax revenues down to the last dollar. I don’t think it’s a structural problem that we…

Journalist:          (inaudible) at all, this raised ten per cent of what was originally forecast: $200 million dollars.

Andrew Leigh: I don’t think it’s a structural problem that mining tax revenues are going to fluctuate up and down. There’s two things here. First of all there’s the slight drop-off in commodity prices. Secondly, the timing of deductions and companies are putting a lot more deductions in in the investment phase than they will be in the volume driven phase of the mining boom that we’re now shifting to.

Journalist:          Ok, you know how forecasting works and there’s been a lot of criticism of Treasury and how these forecast have been so out. Is Wayne Swan taking the high end of forecasting, the range given to him, or is Treasury getting it wrong?

Andrew Leigh: These forecasts are not a political choice. The forecasts are economic judgements done by our best forecasters. Now they’ve never been precise down to the last dollar. In the Howard years we saw underestimates of revenue and last year we’ve seen an over estimate of revenue. That’s not because of any mendacity by the people doing the forecasts; it simply reflects the fact that forecasting is an inexact science and changes in the global economy such as the huge demand for Australian bonds affect government revenues. All right folks, thanks very much.

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