ABC News 24 Breakfast

Subjects: Deloitte Access report, Prime Minister Tsvangirai, Melbourne by-election, leadership.

Transcript, E&OE

23 July 2012

MICHAEL ROWLAND: Let's get more now on that Deloitte Access Economics report that raised serious questions about the budget surplus, and also the visit to Australia by Zimbabwe's Prime Minister Morgan Tsvangirai. The Trade Minister Craig Emerson joins us now from Canberra. Minister, good morning.

CRAIG EMERSON: Good morning, Michael.

ROWLAND: How concerned are you by Access Deloitte Economics saying the budget surplus is all but gone?

EMERSON: Well we don't accept that. We put the budget together; we're returning the budget to surplus. Access no doubt will continue to revise its figures, as it normally does, during the course of the year. Investment in this country is at a 50-year high and, indeed, the Business Council of Australia estimates that investment will have lifted from 20 per cent of the economy to 30 per cent. But we have factored, Michael, the decline in mineral prices into the budget. We've taken account of this.

But there is a contrast here, I'd have to say: and that is the Coalition has just woken up to the fact they've got a $70 billion black hole to fill, which got bigger when Tony Abbott said he would restore defence spending. And now they've said the states should come to the Coalition and ask for an increase in the GST. We will not increase the GST rate. The Coalition has finally worked out that the best way it can plug its black hole is by increasing the GST rate, as it deprives the states of revenue and has them come begging.

ROWLAND: It's not just revenue from the mining boom that's being brought into question here. The report also raises doubts about falling capital gains revenue to the Government. It also cites those flagging financial markets and falling house prices. Is there … are there concerns within the Government that government revenue might blow … falling government revenue might blow a serious hole in that $1.5 billion surplus?

EMERSON: Well as I've indicated, we're returning the budget to surplus. We said we would, and it's not just for 2012-13; it's for the whole period of the forward estimates. We're making the decisions necessary to achieve that. In terms of capital gains tax, we did know that following a huge surge in capital gains tax revenue from about 2005 to 2007 on the back of a surging stock market - which turned out to be built on a bubble, Michael - that there was a lot of capital gains tax revenue around that time. But following the Global Financial Crisis there isn't that sort of revenue. We've factored that in to the calculations. But, as I say, we're returning the budget to surplus. The Coalition's got a $70 billion black hole, plus more. And what they are openly canvassing now is the states coming to them demanding an increase in the GST rate. I think that should be of concern to all Australians.

ROWLAND: Okay, just finally before we move on to other issues: if, for argument's sake, the surplus has gone by the time of the mid-year budget's update, will the Treasurer stick to his promise of doing whatever it takes: either cutting more programs, raising revenue in some respects, to ensure that this is maintained.

EMERSON: We are returning the budget to surplus.

ROWLAND: But taking necessary actions if an update is needed later this year?

EMERSON: Well there are always updates: that is the mid-year fiscal and economic outlook. And that's just part of the normal processes. And we're just returning the budget to surplus. We said we would; we have; and we'll continue to have those surpluses through the period of the forward estimates.

ROWLAND: Okay. Now you're sitting down, along with the Prime Minister, with the Zimbabwean Prime Minister Morgan Tsvangirai. What do you hope will emerge from that meeting?

EMERSON: Well Mr Tsvangirai, Prime Minister Tsvangirai, has a wonderful history of fighting for freedom. In Zimbabwe they have formed an inclusive government. We'll be listening to advice from Prime Minister Tsvangirai about the issue of sanctions. We've supported the government, and most particularly the country, by being the third biggest aid donor, Michael. So we'll be very interested in the advice that Mr Tsvangirai has. If he indicates to us that there is a case for easing some sanctions - that is, to reward the reformers and to show the hardliners that reform does actually pay dividends - then we will be open to those sorts of arguments. But he is very welcome in our country.

ROWLAND: And finally, obviously the Labor Party is very happy about the outcome of the Melbourne by-election in Victoria over the weekend. Now that Julia Gillard has repelled the Greens in that seat, do you see her next challenge as repelling Kevin Rudd once again?

EMERSON: Well it's interesting: there's always another challenge for Julia Gillard. She's the Prime Minister of Australia and she will get on with the reforming task that's necessary to place us in a great position in this, the Asian Century. I note that the Prime Minister's critics, the Government's critics, said that this was replete with federal factors. Well, if it was replete with federal factors then the Prime Minister has done very well. But our argument has all along been that this, after all, is a state government by-election, Michael. And on that basis, I congratulate the Labor Party for successfully repelling the Greens. But, you know, there's been so much of this setting tests and deadlines for the Prime Minister. I think people should just knuckle down, back in a reforming government; back in the true opponent, and that is Tony Abbott, who would bring Australia back to the Dark Ages. Prime Minister Gillard is doing a great job and I'm getting a little bit tired of setting these tests and deadlines. I think it's the right time now for all progressive people, all Labor people, to back in the Prime Minister of Australia. She's doing a fantastic job.

ROWLAND: We'll leave it there. Craig Emerson in Canberra, thank you.

EMERSON: Okay. Thanks, Michael.

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