MICHAEL BRISSENDEN:
Prime Minister Tony Abbott joins me now in our Canberra studio. Prime Minister, good morning.
PRIME MINISTER:
Good morning, Michael.
MICHAEL BRISSENDEN:
It seems your motivation is no longer about fixing the Budget crisis. This is not really about fixing the economy, is it? It is about fixing your political fortunes.
PRIME MINISTER:
Well Michael, it's the right Budget for these times. Last year's Budget was right for then, this year's Budget is right for now, and if you're looking for a consistent theme: budget repair is a consistent theme across both of them, and cutting taxes is a consistent theme across both of them. We abolished the carbon tax and the mining tax last year; this year, a historically large cut for small business tax.
MICHAEL BRISSENDEN:
Is it an election Budget?
PRIME MINISTER:
Well, it's a Budget for the Australian people – that's what it is. It's a Budget to encourage the creative people in our country, the small business people who are at the engine room of our economy, to get on and create jobs.
MICHAEL BRISSENDEN:
But what happened to the budget emergency? I mean you can't deny that a year ago it was a crisis that you were talking about, uphill and down dale. Now, apparently we're heading in the right direction, the plan's working, but the deficit is still forecast to be around $40 billion?
PRIME MINISTER:
Michael, what happened was there was a change of government…[interrupted]
MICHAEL BRISSENDEN:
Yeah, but a change of government doesn't change the fundamentals of a deficit.
PRIME MINISTER:
Well, a change of government means that people who were serious about expenditure restraint come in. Under the former government, expenditure grew at 3.6 per cent real every year. Under this Government, it's growing at 1.5 per cent real. That's very, very significant change and it's because we have got spending under much better control that we can responsibly cut taxes.
MICHAEL BRISSENDEN:
But if I'm not wrong, the 3 per cent figure is a 10-year MYEFO figure that includes the NDIS. Your 1.5 per cent you're quoting a 4-year figure that doesn't include the NDIS?
PRIME MINISTER:
The 3.6 per cent real is what Labor spent over its time in office…[interrupted]
MICHAEL BRISSENDEN:
Yeah, but it's a 10-year forecast.
PRIME MINISTER:
And the 1.5 per cent real is what we're spending over the forward estimates.
MICHAEL BRISSENDEN:
It's apples and oranges, though.
PRIME MINISTER:
I don't accept that, Michael.
MICHAEL BRISSENDEN:
The Budget papers say growth will return to normal pre-GFC levels of 3.5 per cent in three years based on global growth but no-one else is seeing the growth quite as the glass half full that you and the Treasurer are including the Reserve Bank which has interest rates at historic lows. Aren't you being overly optimistic?
PRIME MINISTER:
Well, I've just seen the Westpac chief economist and the NAB chief economist who both said our forecasts, our estimates are credible – and I believe they are. They're done by the Treasury which is the best we've got and they're based on quite conservative assumptions about the iron ore price.
MICHAEL BRISSENDEN:
But in Opposition you criticised the Treasury figures often. I mean, Joe Hockey said we'd achieve a surplus in our first year in office, we'll achieve a surplus every year in our first term, but we're not going to see a surplus now for a decade. Why should anyone trust politicians or the Treasury when it comes to figures because you're all so bad at it?
PRIME MINISTER:
Well, Michael, what we're doing is we've got a credible path back to surplus. We inherited a deficit of $48 billion and every year the deficit comes down by about a half a per cent of GDP and I think under the circumstances that's a very good result.
MICHAEL BRISSENDEN:
Your credible path back to surplus is predicated on the states giving up their fight to get back the $80 billion you took from them in health and education last year though, isn't it?
PRIME MINISTER:
What we did last year, Michael, was implement our election commitment and if you go back to 2013 we said we would honour the then Government's commitments over the then forward estimates period but beyond the forward estimates we wouldn't do it.
MICHAEL BRISSENDEN:
It is still unresolved at this stage, isn't it?
PRIME MINISTER:
What we've said to the states is we want to talk to them about how we can make the education and the hospital dollar go further. That's what we want. We want to try to come up with efficiencies in the system and the point that the states made at the most recent COAG is that you can get savings in health. If you focus on better health outcomes, you can get significant health savings and that's what we want to do.
MICHAEL BRISSENDEN:
But your credible path back to surplus is predicated on that $80 billion, isn't it?
PRIME MINISTER:
We made certain commitments in last year's Budget and those commitments carry over into this year's Budget.
MICHAEL BRISSENDEN:
You're sending another message with this stimulus for small business, too, you're asking them to spend, hoping to overcome the pessimism, that I've put to you that you left with them after last year's Budget?
PRIME MINISTER:
We think that the most creative and innovative people in our economy are the small business people, Michael. We think that they are full of latent creativity and they want to get out and get things going and we're giving them the incentive. We want the ‘have a go’ people in our society to get out there and do just that.
MICHAEL BRISSENDEN:
A lot of them fail too, don't they?
PRIME MINISTER:
Yeah, sure, sure, they do. But that's the thing about small business people, they're prepared to have a go and if they get knocked down once they pick themselves up again and have another go and that's a great thing. I don't think that's a bad thing. I think that's a good thing that they're prepared to have a go and if at first you don't succeed – try, try and try again.
MICHAEL BRISSENDEN:
Ok, you say you've got a spending problem but spending as a percentage of GDP is actually still at 26.2 per cent this year and next which is pretty much the same as the highest point under Labor as a result of spending they had to tackle the GFC. Now, it then falls slightly in the out years but it still doesn't get anywhere near the 50-year average of 23.2 per cent. So, your own figures say you're not really tackling the spending problem, don't they?
PRIME MINISTER:
We are doing the responsible thing under the circumstances that we find ourselves in.
MICHAEL BRISSENDEN:
But circumstances change for every government, Prime Minister, and you didn't cut the previous government any slack when circumstances changed for them.
PRIME MINISTER:
Again, Michael, we're doing the responsible thing under the circumstances in which we find ourselves. The deficit goes down every year by about a half a per cent of GDP and both of our two budgets so far have been significant tax-cutting budgets. Last year, we got rid of the mining tax and the carbon tax. This year, a historically large tax cut for small business. A lot of coalition governments, and indeed some Labor governments, have talked about doing the right thing by small business. We do the right thing by small business.
MICHAEL BRISSENDEN:
But spending a percentage of GDP is not going down that fast or much – and you say you have a spending problem.
PRIME MINISTER:
Michael, we are doing the right thing in these circumstances and again, I say to you, the former government increased spending by 3.6 per cent real. It's come down to 1.5 per cent real…[interrupted]
MICHAEL BRISSENDEN:
No, we discussed that those figures are a little rubbery; your 3.6 per cent figure is a 10-year forecast.
PRIME MINISTER:
And again, Michael, look at what the economists have said this morning about our projections. They think they're credible. They think they stand up.
MICHAEL BRISSENDEN:
Many people would look at you at the moment and say well this government had given up on reform especially after last year's attempts went so badly wrong. Most of the heavy lifting comes from bracket creep, lifting revenue and last year’s big cuts to the states in education and health as we've already discussed.
PRIME MINISTER:
Michael, I know you are determined to be critical. I know you want to be as critical as you possibly can be. I know you do and look, that's fair enough. I mean, I'm used to that. But look, we are getting the deficit down by half a per cent of GDP every year and in the process we are saying to the small business people of our country: get out there and have a go. We know that's what you want to do and we're making it easier for you to do it with the instant asset write off, with the tax cuts and with the very significant incentives to go out and employ people because we want to get youth unemployment down as well.
MICHAEL BRISSENDEN:
As you know there's an opportunity to rein in spending staring you in the face and that's the super tax benefits that the wealthy get. Super tax breaks cost the Budget $32 billion a year. Pensions cost the Budget about $40 billion a year and the trajectory for those tax breaks will outstrip pension costs over time. Labor and the Greens say they will support super tax reform, so why not go there?
PRIME MINISTER:
Well you know, it's interesting – Labor always wants to raid people's savings. Labor thinks that our savings are their piggy bank to be raided at will. We don't have that view. We think that what people put aside for their retirement is their money – not the Government's money and we are very…[interrupted]
MICHAEL BRISSENDEN:
But they are generous tax breaks for wealthy Australians, who can afford to pay more?
PRIME MINISTER:
And people who have put money aside on the basis of a certain set of rules shouldn't have that money raided just because government has got a problem. Now, what we said going into the last election was that the former Labor government had constantly raided super, constantly changed the rules on super. We thought it was important to have a period of stability. There will be no changes to super, no adverse changes to super in this term of Parliament, and we have no plans to make adverse changes to super in the future.
MICHAEL BRISSENDEN:
You were quite happy to change the rules on paid parental leave, though.
PRIME MINISTER:
That's because we got a very consistent message from the families of Australia, that while they wanted a better paid parental leave scheme, their priority at the moment was better child care and given that we can't do everything that we would like to do immediately, that's what we've done. We've invested an extra $3.5 billion into child care so that low and middle income families with children in the child care system on average will be $30 a week better off.
MICHAEL BRISSENDEN:
But some mothers are going to miss out and you've changed those rules but you won't change the rules, you won't do anything about the super tax. People might look at that and think well, where are the priorities?
PRIME MINISTER:
Our priority is to invest money in a more productive economy. Our priority is to invest money in encouraging people to have a go and that's what we've done in this Budget, Michael.
MICHAEL BRISSENDEN:
What about the debt? Now, when you came to government the debt was $177 billion. The forecast in last night's Budget papers were that it will be $285 billion this year and it will be increasing.
PRIME MINISTER:
As long as you are running deficits, the debt continues to build but peak gross debt will be $110 billion lower under us than it would have been on Labor's trajectory, so the debt trajectory is coming down just as deficits are coming down.
MICHAEL BRISSENDEN:
Deficits are coming down slowly and the debt is still increasing.
PRIME MINISTER:
Well Michael, we inherited $123 billion of cumulative deficits. We've got that down by about $40 billion and under the circumstances that's the responsible thing to do.
MICHAEL BRISSENDEN:
Ok, Prime Minister, we'll leave it there. Thank you very much for joining us.
PRIME MINISTER:
Thanks, Michael.
[ends]