Looking for revenue? Don't scrap solid savings measures - Capital Hill, 26 August

As Parliament resumed for the first sittings of the spring session, I joined Lyndal Curtis on Capital Hill to talk about why the government has found itself in such a budget quandary. Here's the video and transcript:





SUBJECT/S: Tony Abbott’s unfair Budget

LYNDAL CURTIS: Throughout the five-week parliamentary winter break, the Opposition has stuck fast to its plans to oppose budget measures it disagrees with. The Shadow Assistant Treasurer is Andrew Leigh and he joins me now in the studio. Andrew Leigh, welcome to Capital Hill.


CURTIS: If I could start with the Finance Minister's comments on increased taxes this morning: isn't it a statement of the obvious that if the government needs to rein in spending, rein in the budget or make room for future spending, it will have to cut existing spending or raise future taxes, won't it?

LEIGH: Those are the clear options for a government that wants to pay down debt, Lyndal. But one of the important things to understand is how we've got to where we are now. Part of that has to do with the government saying ‘no’ to a very large source of revenue in the carbon price. The carbon price isn't just the smartest way of reducing Australia's carbon emissions, it is also an important boost to the budget. 

CURTIS: But that carbon price, the carbon tax, you also spent a large slab of that – giving some back to industry but also some back to consumers.

LEIGH: That's right, and so what the carbon price package did was raise the tax on pollution and lower the tax on work. The government is effectively reversing that. They are cutting the tax on pollution and raising the tax on work. So we'll have an Australia with more carbon pollution, and more disincentives to work.

CURTIS: But how is it a source of revenue to the government if most of that – if not all of that – revenue is being spent?

LEIGH: Well it certainly is a source of revenue, but then we can talk about how government goes about spending it. What Tony Abbott said before he came to office was that magically he would axe the carbon price, but that he would also keep the tax cuts which were associated with it. Now we're seeing that unravelling. We're seeing Mr Abbott, in breach of his clear pre-election promise, raising taxes on work, on travel and also on going to the doctor. So we're seeing a range of broken promises from Mr Abbott.

CURTIS: The Coalition has asked non-government parties – including the Labor party – for alternatives. You keep talking about scrapping the government's $5.5 billion paid parental leave scheme but that doesn't get a budget back to surplus. What else would Labor do?

LEIGH: It's a vital question to be asking, Lyndal. If you look at the things we were doing in government which were reversed when the Coalition came to office, there's some 60-odd measures which were reversed. Among them were Labor measures to make sure multinationals paid a fair share of tax. We had a $4 billion package, put together by David Bradbury, which the government whittled down to a $3 billion package. So $1 billion back to multinationals. 

CURTIS: But you are also opposing some measures you announced before the election too, aren't you?

LEIGH: In certain cases we've taken the view that where we'd made a systematic, structural save in order to free up spending for another area, if the government isn't spending more on that source then we don't think the savings measure is appropriate.

CURTIS: If you believe it is important for the budget to come back to surplus and for the structural problems in the budget to be fixed, but you disagree with the way the government is doing it, don't you have to say 'this is the way the Labor party would do it'?

LEIGH: People can see that very clearly, Lyndal, in looking at the Pre-election Economic and Fiscal Outlook. That had us returning to surplus before the government's timetable in the budget, and it had a smaller deficit than in the budget that the government brought down. Even if Parliament was simply a rubber stamp, which I think the Prime Minister would like it to be, it would still be the case that the current budget would increase the deficit compared with the Pre-election Economic and Fiscal Outlook – not reduce it. Now, Steve Ciobo doesn't want you to compare the budget to the state of the books when they took office. He wants you to compare the budget to Joe Hockey's first mini-budget. But that's not a fair comparison. You've got to compare Labor's books with the Coalition's books. The Coalition are increasing the deficit because of things like parental leave, like scrapping the carbon price and the mining tax, because of saying no to $1 billion of revenue from multinationals. They've made these choices, Lyndal, which have worsened the budget bottom line. 

CURTIS: Are there any consequences if the budget measures which are, at this stage, likely to be blocked, end up actually being blocked? Are there any consequences for government spending, for consumer and business confidence – and are you mindful of those consequences?

LEIGH: Absolutely. One of the things that people have been saying a lot about this budget is that it breaches the fair go test and hits the poorest Australians the most. But also, as an economist I know that those on lower incomes tend to spend all of their income, whereas those on higher incomes have a higher savings rate. So if you hit low income earners, you also have a bigger impact on spending and on consumer confidence because it is low income earners who are spending their whole paychecks. 

CURTIS: One final question: when Labor gets back into government – whenever that is – will you refrain from complaining about non-government parties in the Senate blocking government measures? 

LEIGH: I think that parliamentarians who complain about their job get short shrift from the electorate, as they should. It is an amazing privilege to hold the job that I do, which I enjoy. I get out of bed every morning feeling fortunate to have the trust of my electors and for being given the opportunity to make these arguments.

CURTIS: But given that Labor, in opposition, is prepared to block budget measures, and that Labor, as with the Coalition, complains about this when in government, will you just stop complaining about it?

LEIGH: People will stamp their foot from time to time, but I don't think Australians have looked particularly kindly on a Treasurer who is blaming everybody but himself. He needs to go back to the drawing board, re-think the budget and ground it in the Aussie principle of the 'fair go'. And then I think he will find it enjoys broad support from Labor and the minor parties. 

CURTIS: Andrew Leigh, thank you very much for your time. 

LEIGH: Thank you Lyndal.         



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