Interview with Chris Uhlmann

ABC PM Programme

Tuesday, 8 May 2007
8.20 pm

SUBJECTS: Budget 2007-08

TREASURER:

It is about economic management.  It is about making sure that we lock in the progress we have made with 2 million extra jobs, with real wage increases, with a balanced Budget and we invest for the future.  We invest for the future with our Higher Education Endowment Fund which will be there forever, which will be generating earnings for decades to come.  We invest for the future by increasing skills of the Australian workforce.  And we invest for the future with heightening work incentives particularly tax cuts for middle Australia. 

UHLMANN:

If you look at the Education Endowment to start with, of course Kevin Rudd has made much of his Education Revolution, how can this be not be seen as a way of trumping that?

TREASURER:

I don’t think he ever had the idea of setting up a self-financing endowment fund which could put the Australian university sector on a strong financial footing and build first-class institutions by world standards.  This education package of course also has directly targeted measures to help reading and writing with children, to get more apprenticeships and to make sure that we increase skills in those areas of the Australian economy where we have shortages at the moment. 

UHLMANN:

Did you think about taking some of the pressures off students, many of whom of course now have to work to subsidise what they are doing at university?

TREASURER:

Well we do have a provision in this Budget to increase scholarships so that there will be more Australian students who will be entitled to receive scholarships.  And the help system which allows interest-free loans is also quite good in so far as you don’t really have to pay that loan back – an interest-free loan until you are in the workforce and earning a good income. 

UHLMANN:

If we take the tax cuts now, but look if we actually move beyond that just for a moment and look at the sorts of benefits that you are returning to people this year, there seem to be a lot of hand-outs that fall in this financial year, again that will be typified as an election year hand-out. 

TREASURER:

I don’t think so.  We have cut tax for those in the workforce, well what about a benefit for the aged pensioners?  The aged pensioners don’t pay tax.  So what we have announced in this Budget is a bonus for the aged pensioners, I think that is fair enough.  Aged pensioners who are on about $13,000, $14,000 a year, we have got a strong economy, they deserve some recognition.  That is why we are paying them a bonus. 

UHLMANN:

Now your own Treasury Secretary was talking about population, participation, those kinds of things, how does this Budget address those needs in the economy?

TREASURER:

Well very well.  We have on the population front of course, re-directed the immigration programme to make sure it is directed at people who have skills, who can add to Australia’s economy.  On the participation front, what we do is we have measures with increased childcare and lower tax which will help mothers if they want to return to work to do so, and also of course help people who are in part-time work increase their hours.  And of course our welfare changes which encourage people to come off welfare will also be important for boosting the capacity of the Australian workforce.

UHLMANN:

You have spoken a lot about the future and of course now you put out two Intergenerational Reports.  We know that over the next 40 years we will see our expenses grow by 2 per cent a year, you have now factored in a structural change to our tax system, you have taken money out of the system.  How wise is that?

TREASURER:

I think that it is responsible because we have got our Budget in surplus, we have got no debt.  I think the responsible thing now is to return money to taxpayers, encourage them to work harder and boost the capacity of the Australian economy.  This is all about increasing the capacity of the Australian economy. 

UHLMANN:

You have a very large government, you were saying that by international standards it is not particularly large, but by Australian standards over the last 10 years or so this Government has grown exponentially, one day someone is going to have to cut that, aren’t they?

TREASURER:

I don’t think so.  When you talk about the size of the Australian Government, Australia’s spending in proportion to its economy is lower than the United States.  It is the second lowest of the developed economies of the world.  We have actually, by international standards, got a small government compared to the economy.  And in fact if you look at expenses compared to the economy and for that matter tax compared to the economy, they have been going down in Australia under the Coalition Government.  Now, what happens in the future essentially will be governed by whether we can continue to grow our economy.  If we can continue to grow our economy, we will be able to lock in these gains.  But to grow our economy we need to increase our capacity and that is what these changes are all about. 

UHLMANN:

Is there a single existing government programme though that you have cut or reduced?

TREASURER:

There would be but I won’t be going into that now. 

UHLMANN:

Now, defence is getting $2 billion more, are they really capable of spending that wisely?

TREASURER:

Well we have got the needs of equipment in particular in defence, we have got the acquisition of Super Hornets to replace our F-111s and after that acquisition of big items such as the joint strike fighter.  We are modernising Australia’s defence force, we are increasing recruitment and retention, we are trying to build the Australian defence forces.  And if you look at their deployment in Iraq, Afghanistan, East Timor and the Solomons, you will say that is a wise decision. 

UHLMANN:

Now is your education system, or your education voucher system a way of by-passing the states, is that what you are trying to do?

TREASURER:

Well, the Commonwealth Government does provide a lot of money for education to the States.  The States run the school systems, the Government school systems.  We want to actually get benefits direct to students and to teachers rather than just pump more money through the States where we have been pumping a lot of money in recent years.  Why not give it to the students?  Give it to the parents.  If a student is having trouble, give them a voucher which will be able to get intensive assistance.  If you want to encourage good teachers, why not run summer schools for them where they can come and upgrade their skills.  This is, rather than just putting it into a big pot which ends in State capitals, why not actually get it to teachers, to students and to parents. 

UHLMANN:

All right, a couple of more quick things.  If you look at what Kevin Rudd is talking about too, he is also talking about broadband across the country.  Are you looking at 20th Century infrastructure while he is looking at 21st Century infrastructure?

TREASURER:

Well, in relation to infrastructure I think it is important that we do have strong infrastructure.  There are two proposals at the moment before the Australian Competition and Consumer Commission to build it without any taxpayers’ dollars.  So if the private sector is going to build it, not once but conceivably twice, why should the poor old taxpayer have to fork out?  The other thing I would say is, under no circumstances will we let any little bear get his hands in the honey pot of the Future Fund.  That is what Mr Rudd is proposing – to rob the Future Fund.  It is not money that he saves, it is not a fund that he set up.  To rob it for cheap political advantage is unforgivable. 

UHLMANN:

Finally, have you done enough to prepare for the end of the mining boom, do you think?

TREASURER:

Well we have got the biggest investment that you have ever seen in education.  We are funding the Future Fund.  We are improving industrial relations.  We are making sure that road and rail is being built.  This is a country which is now engaging in record investment.  And that investment will set us up for the decades which lie ahead.

UHLMANN:

Treasurer, thank you.

TREASURER:

Thank you very much.