FRAN KELLY: The true state of the Federal Budget will become clearer today when the Government releases the Mid-year Economic and Fiscal Outlook, known as MYEFO. In what will amount really to a mini-budget, Treasurer Wayne Swan is expected to announce a new round of savings and revenue measures to plug a $4 billion hole that's emerged since the May Budget. A collapse in commodity prices and fall in corporate tax take are the cause of the sharp downgrades in the revenue collections. But the Government remains committed to delivering that slim budget surplus. Opposition Leader Tony Abbott says the Government has brought MYEFO forward a few weeks because it wants to avoid more bad economic news ahead, including lower than projected revenue from the mining tax.
TONY ABBOTT [clip]: We can be absolutely confident that it will be a mini-budget of broken promises, of higher taxes, and of cooking the books, because you just can't trust the current Labor Party with public money. Their record is always the same: it's more spending, it's higher taxes, and it's cooking the books.
KELLY: Opposition Leader Tony Abbott yesterday. Well the Trade Minister Craig Emerson joins us now. Minister, good morning. Welcome to Breakfast.
ABBOTT: Thanks, Fran.
KELLY: Craig Emerson, why is the Government going so early with this MYEFO, with this budget update? Are you trying to avoid more bad news ahead?
EMERSON: Of course not. We will achieve savings in this budget … in this MYEFO, and the purpose of those is to return the Budget to surplus in the context of some revenue write-downs. We will achieve, as a result of those savings, a longer effect by bringing MYEFO down now. It's ironic, of course, that last year, on the fourth of November, the Opposition was complaining that MYEFO hadn't been brought down and was demanding that it be brought down. When we bring it down, they complain about that – which just tells us yet again what we know about the Opposition, and that is they are relentlessly negative.
KELLY: But Minister, the timing does seem strange, given that the receipts from the mining tax start to come in today. Why on earth wouldn't you wait for that tax take to become clear before you give us a budget update?
EMERSON: Well I'm indicating that we will be making savings. Those savings have a longer effect if you bring the MYEFO down now. That's what we're doing. We will have another Budget in May of next year. There'll be a Mid-year Fiscal and Economic Outlook beyond that and we're making the savings necessary, Fran, not only to bring the Budget back to surplus but to keep it there. And, importantly, we're making long-term savings. That long-term work that means that the savings will amount, of decisions already taken, to around 2 per cent of GDP or savings of about $50 billion in a decade's time.
KELLY: Is it fair to conclude, though, that …
EMERSON: It's not just the short term. It is making sure that we've got a long-term fiscal position that is completely sustainable – again, in sharp contrast to the Coalition, which still hasn't answered how it's going to plug its $70 billion black hole.
KELLY: Will the savings announced today – and leaks have suggested that the savings will amount to around $4 billion for this year and $20 to $21 billion in the four years ahead – will they take into account a deterioration in the proposed mining tax receipts? Has the Government already got a sense of how big that deterioration will be, and will this …
EMERSON: Well, the Government already obviously has estimates of all of the revenue figures: that's what goes into MYEFO. All of that will be revealed by around 11 o'clock today. The Budget will be returned to surplus; it will stay into surplus; and we are doing the long-term fiscal work to make sure that our budget position is sustainable and that will make …
KELLY: How big is the deterioration, then, in the mining tax take? Because BHP and Rio seem very confident they won't have to pay nearly as much as they first thought.
EMERSON: Well, I'll just finish the last bit. That will make room for initiatives such as the National Disability Insurance Scheme and, of course, the school funding reforms to which this Government is committed. In relation to mining tax, to other revenue sources, you'll see all of that at 11 o'clock. It's not long to wait, Fran. But be assured that we understand and we are implementing a budget task which will ensure that we retain our Triple-A ratings – one of very few countries that has a Triple-A rating from all three ratings agencies. And as a result of the sorts of the decisions and other influences, we've seen a reduction in the Reserve Bank cash rate from six and three-quarter per cent to three and one-quarter per cent, saving a mortgage holder of $300,000, $4,500 a year. So when your listeners say 'why a surplus?', that's a pretty good answer.
KELLY: You're the Trade Minister, which means you'd be very cognisant of the impact of commodity prices falling over recent months: somewhere between 15 to 35 per cent for iron ore, thermal coal and coking coal. It's a massive drop. How much harm has falling commodity prices done to the bottom line? What's the impact of that?
EMERSON: Obviously, it has had an adverse impact. We need to keep this in context. Commodity prices were at 140-year highs for Australia. They have come down. They are on a shoulder; it's not as if they are down in the abyss. And we do know that the world economy is growing slower than the IMF and the World Bank had thought it would grow in this year. But there are prospects for further growth next year in China. The forecasts are for stronger growth in China. We still have a weak economic situation in Europe. And in the United States, after the presidential election is settled, there's hope that this problem of the fiscal cliff will be remedied with the Congress needing to get together to make sure that the situation in the United States is conducive to growth. If they do that then we can look forward to a pick-up in growth in other countries. But here we have Australia, according to the IMF, set to grow this year and next faster than any major advanced country. And we've lifted up the global rankings from 15th-largest economy in the world to 12th-largest economy in the world during the course of this Government.
KELLY: Nevertheless, the Government faces this difficult budget task. You've said the cuts they've announced will make room for some of the big policy promises the Government's made since May, including the National Disability Insurance Scheme and the response to the Gonski schools report. Big ticket items. Will this Budget update today tell us how the Government's going to pay for this?
EMERSON: No. What I said is that the decisions already taken, such as the means-testing for the Baby Bonus, the means-testing of other payments, are already set to yield benefits in the long term. And that will help make room for those programs that I've just announced and that you've repeated, Fran.
KELLY: So will we get the spending plan for these big announcements: the NDIS and Gonski?
EMERSON: I think you know that those spending plans are around 2014 and beyond. But we are always looking for savings, not only to return the Budget to surplus but to keep it in surplus over the longer term. And that's the sort of work that Wayne Swan, Penny Wong, and their team have been doing. We've been doing long-term fiscal repair work for some considerable time now.
KELLY: If this Budget update, though, doesn't tell us how the Government plans to pay for the NDIS and the Gonski report, or Gonski reforms, it's not a true reflection of the Government's budget position is it?
EMERSON: Well it is a standard Mid-Year Fiscal and Economic Outlook. They are a standard formula, a standard presentation. That's what we'll do, Fran. We'll bring down a full Budget next May. There's nothing new in MYEFO; there's nothing new in bringing down budgets in May. What I'm simply indicating is not only has this Government been implementing the decisions to return the Budget to surplus in 2012-13, along the way we have been making the necessary decisions to ensure that over the long period the fiscal position of Australia is sustainable. I've already indicated that in a decade's time, as a result of decision already made and already announced, the budget position will be $50 billion in today's dollars better off than it otherwise would be. I'm simply emphasising to your listeners that this repair, the returning of the Budget to surplus, is important in the short term and sustaining it in surplus is important in the long term.
KELLY: Minister, can I just get a quick response from you to today's Newspoll which shows a lift – Nielsen poll rather – which shows a lift in Prime Minister Julia Gillard's popularity or approval rating. Do you put that down to the speech the Prime Minister gave on sexism two weeks ago?
EMERSON: I'm not an analyst on these things, Fran. It could be, but this is a trend. It's trend that's been evidenced since the first of July whereupon on that day the sky did not fall in. Whyalla's still there and the carbon scare campaign has fallen to the ground – not the sky, but the scare campaign. You've got a Government committed to doing everything it can to support working Australians, and an Opposition that's got only one weapon in its political arsenal, and that is its destructive negativity. And the Australian people are coming to accept that reality.
KELLY: And just finally, if this is a trend and the Prime Minister's approval rating is going up, in a week or so Maxine McKew's book will come out which reportedly accuses … she accuses Julia Gillard of reportedly being a control freak who manufactured a leadership crisis in the ALP in a classic stitch-up of Kevin Rudd. The timing of this won't be helpful, will it?
EMERSON: Well, look, the timing is completely in Maxine McKew's hands. But I saw Bill Shorten repudiate that yesterday; I repudiate it. We have a Prime Minister, a strong leader who is interested in this country's future and sometimes has to make decisions, such as putting a price on carbon, that may not be in the short term popular, but in the long term it's essential. The Australian people are coming to accept that this Prime Minister has the national interest at heart. She's doing a great job; she's showing all the necessary courage. And a book here and a book there won't make any difference to that.
KELLY: Craig Emerson, thank you very much for joining us.
EMERSON: Thanks a lot, Fran.
- Minister Emerson's Office: (02) 6277 7420
- DFAT Media Liaison: (02) 6261 1555