Interview with Fran Kelly

Radio National

Thursday, 8 February 2007

7.50 am

SUBJECTS: Water plan, Murray-Darling Basin, carbon trading, climate change

KELLY:

Treasurer, welcome again to Breakfast.

TREASURER:

Good morning Fran, it is good to be with you.

KELLY:

Well we just heard Premier Mike Rann and he is clearly not won over yet by the Commonwealth’s water plan, the Murray-Darling Basin takeover plan, he says there are not enough safeguards there, he wants things like minimum guaranteed entitlement flows written in and there are not there, and he doesn’t like the idea of federal control unless it is structured, sort of the way the Reserve Bank is structured, with an independent board relating to a Minister, do you like that idea?

TREASURER:

I welcome the fact that he is giving such praise to the Reserve Bank and its structure because…

KELLY:

Well it works, most us probably think it works.

TREASURER:

…after all when I put in place that structure the Labor Party was very critical of it so 10 years down the path I welcome the fact that it is now held up as a great model of independence. But this of course is a different task to the operation of monetary policy, this is the issue of balancing competing demands for limited resources, which will take the spending of a great deal of taxpayers’ money, and in those circumstances I think it is better to have that done by people who could be made much more directly accountable, and they of course are the people, the political leaders who run in elections. And just as Mr Rann would not say that the Government of South Australia should be run by an independent business panel, he would say, presumably it should be run by him and Ministers accountable to the people. So this very important area of policy, of water policy, if the Commonwealth has jurisdiction, should be run by those who are directly accountable to the people.

KELLY:

You can look at that both ways though, that argument, can’t you, political accountability has been argued as being part of the problem over the years as Premiers have been accountable to the voters every three years, basically argued to put in place water limits and the way the whole thing operates, that will meet with voter approval and that is part of the problem. Last night I was flicking through a book edited by leading CSIRO scientist, HJ Frith back in 1974 there was a symposium on the Murray-Darling Basin, it could have been written today, it said, ‘the Murray-Darling Basin represents one of the country’s most complex problems of resource conservation and management. Policy making is hampered by legal and constitutional difficulties due to the need to satisfy four governments.’ The last line of the book says, ‘it remains for the nation as a whole to implement the proper policies. If this is not done and soon, our descendents will surely curse us.’

TREASURER:

I couldn’t agree more. And what is the critical point, that the nation as a whole has to deal with this. You have got water that can flow from Queensland through New South Wales, Victoria to South Australia that can be allocated by a Queensland Government without regard for New South Wales or New South Wales without regard for Victoria or Victoria without regard South Australia, you have got a problem and I have been a long term proponent of federal control – or Australian Government control to be more precise – of water that crosses State boundaries. You go back to that CSIRO scientist, in 1974 he was putting it forward back then. Now this Government has stepped forward and has made that offer. Let me make this point Fran, why was it not possible to do this earlier? Well, maybe the public wasn’t ready for it…

KELLY:

Maybe the Federal Government didn’t want to take on the National Party, too.

TREASURER:

…well, I don’t think it has got anything to do with the National Party, I will tell you why, Fran. Maybe the Federal Government couldn’t afford $10 billion in any previous generation to fix this problem. And it is actually a testament to the fact of what you can do if you run an economy properly, we have now retired our debt, we do have $10 billion over ten years, we were in a position to make an offer which no other Federal Government could have made, even though it was the right offer and even though maybe it should have been made 100 years ago. But the fact is it has now been made and I hope that when the Premiers come to Canberra on Thursday that they will accept it.

KELLY:

Do you have anything to say in reports today that a paper from the Murray-Darling Basin Commission questions the sums in the Government’s proposal? It says, there is not enough money set aside in that plan for the Commission to do its job in monitoring the environmental management of the Basin. Is that true and is this a sign that this mega-water plan was rushed out to meet a political deadline?

TREASURER:

Well Fran, I haven’t seen that paper, but…

KELLY:

I guess you have seen the Budget.

TREASURER:

…well if the Murray-Darling Basin Commission sends me the paper I would be very interested to read it. But I will make this point, the Murray-Darling Basin is $10 billion in front of where it was before this offer was made. Now you could always sit around and say we would like to be $10.9 billion in front. But let me make this point, you are $10 billion in front in terms of the allocation of resources from the Federal Government in relation to this great national issue and I just hope that we can get some agreement with the Premiers today.

KELLY:

Treasurer, can we go now to the Government’s taskforce on carbon trading which the draft report came out yesterday. In response, the Prime Minister said, we are not going to sacrifice the jobs of coal miners in pursuit of some kind of knee-jerk reaction. Now, the climate change findings from those 2,500 scientists in Europe last week are hardly knee-jerk, at some point, don’t we, all of us, have to make some sacrifice here, whether it is some coal miners’ jobs or all of us paying more for electricity to put some reality into this debate and get some action?

TREASURER:

I think you are right, Fran, the reality is if you want to reduce carbon emissions, there is going to be a cost. People have got to understand that. All of these mechanisms are mechanisms which are being talked about to get people to reduce their consumption of carbon emissions. Now what does that mean in practical terms? Electricity and petrol. If you want to reduce the emissions of carbon in the atmosphere not just in Australia but around the world, then you are going to have to reduce coal burning, which is in our country the biggest source of electricity, and the use of petrol in cars. You are quite right, this is not a cost-free exercise. People need to know that and I think what they are interested in – I think people do want to ensure that we reduce carbon emissions, they do want to respond to this global problem – I think what they are interested in is what is that going to mean in practical terms and how is it best done. And it needs to be done in a way which continues the growth of the economy and secures peoples jobs and none of us would say that it would be an acceptable price to put millions of people out of work and it has to be done in a way which won’t destroy the household budget when it comes to electricity.

KELLY:

But with respect Treasurer, that is exactly the same argument we have been having now for the last 15 years probably and isn’t the time now for action, we actually now have business leaders in this country and overseas, but particularly let’s look at the leaders in this country, calling for the Government to bring in some kind of trading scheme so they get certainty. We need to act eventually.

TREASURER:

Well a paper was released on this yesterday, Fran and I think it was a very good paper. I think it got right down to the practicalities of the different design features that could be incorporated in such a scheme.

KELLY:

And it said Australia could take the lead in setting up emission trading to be positioned within the first wave of countries as a step towards a workable global scheme.

TREASURER:

I think Australia should look very carefully at a trading scheme. But I will make this point, even if we had the most perfect trading scheme in Australia, that won’t reduce global carbon emissions because Australia is such a small proportion of the problem here. Now we could well have our own scheme and that would allocate risk throughout the economy. But if you are really interested in stopping global warming, which is what we are really doing this for, you would want to know that the real problems are also part of the solution and the real big emitters are economies like the United States and China and India.

KELLY:

Sure and we are working in a group with them, an AP6, maybe if we come up with a national model, we can work within that group for a regional model.

TREASURER:

Well I think this is a real possibility, isn’t it? Let’s suppose that in our work through the AP6 we can design some kind of scheme which would be acceptable to the United States, China and India. Now you are in business, now you are really talking. And of course it would give Australia some partners that it could work with. There is a scheme of course in the European Union…

KELLY:

Well let’s come up with a scheme and do it and then you might have something to…

TREASURER:

Well there is a scheme in the European Union, as you know, where the countries in the European Union within their association are currently trading but Australia is not a member of the European Union. If we could get a breakthrough in relation to the AP6, not only would it be good for the region but now you are talking about something that is serious for the world because you have got the United States, China and India as part of it.

KELLY:

Treasurer, a political question, there has been a lot written this week about the way the Government is travelling, the way the PM is travelling, the polls were very strong for Labor this week, are you getting nervous that you might not get your chance to be Prime Minister of this country, you might get to be Leader, but of the Opposition?

TREASURER:

Well Fran, I am the Treasurer of the country and what makes me nervous is if the kind of economic management that I have put in place over the last 10 years was undermined by the election of an inexperienced government…

KELLY:

Do you accept the political ground has shifted?

TREASURER:

…well that is what makes me nervous because all of the work that we have done in balancing the Budget, creating jobs, getting inflation low and retiring Labor’s debt, funding superannuation, investing in infrastructure, could be lost. That is what I think about Fran, I don’t think about jobs I don’t have, I think about jobs I do have and the responsibility that I do have and the point I made the other day is the reason…

KELLY:

We are nearly at the news Treasurer, I am about to run out of time.

TREASURER:

…well the reason I am fighting the next election is for the sake of the Australian people and their economic prospects, that is what interests me.

KELLY:

All right Peter Costello, thanks very much for joining us on Breakfast.