SKY News AM Agenda (9)

16 April 2015


SUBJECT/S: East-West Link, Liberals’ Budget Chaos and Confusion; GST and State Taxes, Car industry

KIERAN GILBERT: With me now we have Liberal frontbencher Kelly O’Dwyer joining me live from Melbourne and Labor frontbencher, Jim Chalmers. Kelly, first to you on this story. Now, there’s been a lot of talk about the issue of sovereign risk and so on, but I want to put to you the reaction from both the Spanish authorities. The Spanish Ambassador welcomes this deal done – compromise by Daniel Andrews. As does the French Ambassador saying “to my mind, the outcome is good news for Victoria, good for Australia and for the business relationship between France and Australia.” Of course, the French and Spanish companies are key parts of the consortium. So, overall Andrews has come up with a decent compromise given this divisive situation, hasn’t he?

O’DWYER: Well, what he’s come up with is ripping up a contract that was signed to deliver vital infrastructure that Victoria needs at a cost to more than 7,000 jobs and around a cost of $1 billion that we are aware of, although we are still trying to add up all the figures. It’s still unclear exactly how much has been spent on not building a road in Victoria. But let me say this, this Government has introduced for the first time the idea of sovereign risk. We are now being compared with countries like Venezueala because of the decisions made by the Andrews Government. We are overseas at the moment and the Treasurer is overseas at the moment with the World Bank and the IMF, and he is signing deals, signing memorandums of understanding for our global infrastructure hub. This was the project that we led at the G20 which will be based in Sydney. Now, when you have Australia being talked about as a sovereign risk country by virtue of what the Andrews Government has done in Victoria, it is a disgrace. It is a disgrace to those people who are going to bear the cost of that and that is Victorian taxpayers.

GILBERT: Jim Chalmers, your reaction to that. And I guess the point that’s being made is that it would be hard to see a federal Labor party, with Chris Bowen, yourself and others included ripping up a contract – cancelling a contract of this sort – after an election. What’s your take on all of this, of course from Brisbane, but you’d be well aware of this very controversial issue down south?

JIM CHALMERS, SHADOW PARLIAMENTARY SECRETARY TO THE LEADER OF THE OPPOSITION: Yeah of course. I think Daniel Andrews is to be commended for following through on an election promise. The reason this is so unfamiliar to Kelly is because the federal Liberals haven’t done a good job on following through on the commitments they made to the Australian people. But Daniel Andrews made this commitment. As you said in your question to Kelly, this is an outcome that has been achieved with substantial negotiation and discussion. People are generally happy about the outcome, and Daniel Andrews has other ways to ease congestion on Melbourne roads.

GILBERT: Let’s move on to some other issues now. Kelly O’Dwyer, you’re Parliamentary Secretary to the Treasurer. Mr Hockey says that the feedback from Wall Street – from Standard and Poor’s and others – is that they welcome – accept at least – Australia’s slower trajectory to surplus. Is that basically just the reality that we’ve got to deal with? And I guess not everyone’s happy with this pace. Certainly many in the business community think the Government should be putting the foot down a bit quicker in terms of reform here.

O’DWYER: Well, certainly we have passed through the Senate more than $30 billion worth of savings. A number of those savings though that we have tried to get through the Senate have been held up deliberately by the Labor Party - $5 billion worth of course that the Labor Party themselves introduced when they were last in Government, or spoke about introducing when they were last in Government. Yet politically now, they are trying to obstruct. Obviously, we would like to be able to deliver a surplus sooner by cutting spending and by getting the budget back under control. That is something we are trying to do. We have been thwarted by the Labor Party who are not an honest partner in trying to get the future of Australia back on track. Now I understand why the Labor Party does not want to be part of the solution, because they were very much part of creating the problem here. But they do have a responsibility, for future generations of Australians, to help fix the mess that they created.

GILBERT: Do you, Jim Chalmers, welcome the fact that Standard and Poor’s still, according to Mr Hockey, sees Australia as structurally in good shape, a good place? And I guess, you’d feel some empathy for him, given the ever falling price of iron ore, given you when you were working for the former Treasurer faced a similar situation with the declining mining boom.

CHALMERS: Well there are a lot of issues in that question, Kieran.

I think Kelly’s got a lot of nerve talking about honesty given it’s the dishonesty and chaos and confusion on the Liberal side that’s smashing consumer confidence and flowing through to the unemployment rate. That’s the first point.

But when it comes to the ratings agencies, one of the proudest achievements for the former Labor Government was that for the first time in our history, Australia had a AAA credit rating from all three of the big ratings agency. That had never ever happened before – not under Costello, not under any of our predecessors. So that’s another important point.

It is true that the ratings agencies look at trajectories. It is true that the ratings agencies generally take a favourable view of the Australian fiscal position and that we do need to demonstrate over time a responsible and careful and manageable way to improve the budget bottom line. Unfortunately, for the Government, for Joe Hockey in particular, the budget deficit has gotten much worse under his watch. He said he would make it better, he has made it much worse.

We’ve got this chaos and confusion in the economic commentary and the budget commentary from the Government. Just yesterday for example Kieran, we had the Prime Minister stand up in a speech in Australia saying that he expected the fall in the iron ore price would have big implications for the budget. On exactly the same day, the Treasurer in the United States said that he didn’t expect there to be a big impact on the budget.

That’s just one of many examples of how the chaos and confusion in economic policy on the Liberal side of the Parliament is smashing consumer confidence, which is down ten per cent since the election. That’s flowing through to the unemployment rate which is higher now – unbelievably – higher now in Australia than it was during the depths of the Global Financial Crisis. The Government has a lot to answer for when it comes to the way that their confusion and their chaos is damaging the economy.

GILBERT: Well, Kelly you can respond to a bit of that. And also, another point I want to put to you in terms of confusion, I guess, relates to the tax rate, the corporate tax rate. Having a two-tiered system in your view, is that sustainable?

O’DWYER: Well, first let me just quickly respond to a couple of points that Jim raised. He talks about ratings agencies and being able to achieve AAA credit ratings. Well, let me say it was under the Labor Party in 1986 and 1989 that we received downgrades from Standard and Poor’s and Moody’s for our AAA credit ratings. And we received those downgradings a number of times down to AA. And it was only under the previous Howard/Costello Government that we achieved those ratings agencies back to AAA. Now he’s talking about Fitch, which is one ratings agency. But all the hard work was done during the Howard/Costello years, where the budget was repaired. We’re undergoing that same repair job. We’re being obstructed in doing that right now. But that is not going to dissuade us from the very serious task at hand.

When it comes to tax, obviously, we’re a Government that wants lower, simpler and fairer taxes. We have a record as a Liberal Government of cutting taxes. Already, we’ve cut the carbon tax, we’ve cut the mining tax and…

GILBERT: Your former boss doesn’t agree with you though. Your former boss, Peter Costello, thinks you’re not doing much of a job. A ‘morbid joke’, the way he called it.

O’DWYER: Well, when I talk about the Liberal record, I’m talking about his record too cutting taxes – both the company and personal income taxes. And we have embarked upon that by at first cutting carbon tax, the mining tax and now we’ve announced a company tax cut for small business. But that’s not going to be the end of it. That’s the whole reason we have brought about the tax whitepaper, to be able to discuss how it is we can make our tax system more efficient, more fair and how we can actually cut taxes further to increase growth and productivity.

GILBERT: We’ve got to take a quick break, and we’ll be back with Kelly O’Dwyer and Jim Chalmers

GILBERT: This is AM Agenda. With me this morning, Parliamentary Secretary to the Treasurer, Kelly O’Dwyer and the Parliamentary Secretary to the Opposition Leader, Jim Chalmers. Kelly, to you on Peter Hendy’s comments – he’s the member for Eden-Monaro, he’s also the former head of the Australian Chamber of Commerce and Industry. He says that the Government should stop indicating that it might be open to a rise in the GST, rather he’s advocating that the states have reinstated their powers to take income tax. To have their own revenue stream, in return for reduced federal taxes. What do you say to this, because this is obviously something that we haven’t seen for many, many decades in Australia – state income taxes?

O’DWYER: Well, look Peter Hendy is someone who I respect enormously and comes with a wealth of knowledge and experience to this debate as somebody who has participated in the tax debate over many, many years. He’s got a view on this issue which he is putting forward to be part of the tax consideration and also the Federation White Paper. Because what he is proposing would obviously be a reasonably significant change to the way tax operates. Now we haven’t ruled anything in or out, that’s an issue for people to assess. What is clear though is that states are very good on the one hand at pointing the finger, or putting the hand out to ask for more money. And truthfully, they have a lot of powers presently to raise their own revenues in a whole variety of different ways. The question has to be asked, are the states always making the best decisions about how they spend that money? And we’ve seen the perfect example in the state of Victoria, where a billion dollars is basically going to be down the drain as a result of a political and ideological decision of the Andrews Government to not listen to the hundreds of thousands of Victorians who want the East-West roadway project built.

GILBERT: Now, Jim given the Labor Party is so vehemently opposed to an increase in the consumption tax, does this idea make sense, that the states be returned these powers to take income tax, which they gave up back in World War II?

CHALMERS: Well, Kieran you’re absolutely correct to say that we won’t support an increase to the GST or the broadening of the base. We’ve said that repeatedly. But we are up for a conversation about tax reform in other areas. The primary reason or one of the absolute key reasons why State budgets are under so much pressure now is because the Abbott Government in the last Hockey budget cut $80 billion over ten years out of schools and hospitals right around the country. In my home state of Queensland, as the Health Minister Cameron Dick has pointed out today, that means $11 billion cut out of Queensland hospitals alone. So that’s the main reason…

GILBERT: So where does the money come from?

CHALMERS: That’s the main reason why state budgets are under so much pressure. We are up for a conversation about tax reform across other areas. We’ve put forward some very constructive proposals around tax of multinational companies that arrange their debt and arrange their profits in such ways so as to avoid tax. That proposal is on the table. It’s been worked up with experts from around the country and around the world. And we’ve said to the Abbott Government that if they wanted to take that $7.2 billion in revenue over the next ten years, which would help alleviate some of the pressures on the budget, then we would pass that through the parliament.

GILBERT: So, you’re not opposed in principle to this idea, Jim, before I go back to Kelly?

CHALMERS: We’ve just made it clear about what parts of that Tax discussion paper which was released by the Treasurer a couple of weeks ago, that we’re not interested in and that’s principally the GST rate, but we’ve said over and over again whether that’s Bill Shorten or Chris Bowen or Andy Leigh or others that we’re up for a conversation about tax reform more broadly.

GILBERT: Kelly O’Dwyer you wanted to interject there?

O’DWYER: I just wanted to very quickly respond to just one point that Jim raised in relation to the cutting of hospital funding. Over the forward estimate period, over the next four years, we’re actually increasing hospital funding. 9% this year, 9% next year, 9% the year after and 6% the year after that. So it’s simply not correct to say that it’s been cut…

CHALMERS: It’s in your own budget papers, Kelly. You still haven’t had a look at your own budget!

O’DWYER: However, the point I would also make is that he talks about an $11 billion cut in Queensland. Well let me say this. We are spending $1 billion every month on interest payments alone on the debt that has been borrowed by the previous Labor Government. Now if we can get our budget back under control, think of how that money can be better spent.

GILBERT: Finally, this idea of deregulating the car market. Kelly O’Dwyer, your thoughts? We’re almost out of time, but just quickly your thoughts on this. The Government is considering allowing consumers, everyday Australians, to buy their cars from overseas dealers. What do you make of this?

O’DWYER: Look, the Government is consulting on this issue. This is a proposal that has obviously been brought forward. We are interested in people’s views on this. We believe that it is important to have competition in the market place and anything can reduce the cost to consumers is obviously something that we think would be very welcome.

GILBERT: Jim Chalmers, your thoughts?

CHALMERS: Yeah, my neighbour has a car yard in my electorate and he thinks it’s a good idea. We’ll balance a whole range of views. A bit like the Government, we’ll work through all fifty recommendations of the Harper Review on Competition with an eye to the best outcome for consumers whether it be on this issue about cars or across the board.

GILBERT: It seems to make sense given the manufacturing industry is going to be pretty much shut down within a couple of years, Jim Chalmers, to allow Australians to have access to the best quality cars at the lowest price.

CHALMERS: Well, that’s right. We want people to access the best cars they can at the cheapest price. That’s absolutely true, so long as they comply with Australian standards and all of that. But the point of having a Harper Review like this and discussing it properly and methodically working through the fifty recommendations is to balance all of the views on all sides of the argument first, before we come to a view.

GILBERT: Okay, Kelly O’Dwyer thanks so much for your time and Jim Chalmers as well thank you. And good choice on the pink tie as well Jim. I endorse it. That’s all we’ve got time for this morning on AM Agenda. We’ll see those two soon in the next couple of weeks. In the meantime a quick break, back in just a moment.