PETER VAN ONSELEN: Welcome back, you’re watching Australian Agenda and we are joined now by the Manager for Opposition Business, also the Shadow Finance spokesperson Tony Burke. Thanks for your company.
TONY BURKE, SHADOW MINISTER FOR FINANCE: Good morning.
VAN ONSELEN: I wanted to start by asking you about something that just a short time ago Joe Hockey had to say on another network. He’s obviously doing an interview in the countdown to the May budget. And this is a quote, it might be slightly paraphrased but it is: “There is a serious question” – this is what Joe Hockey said – “There is a serious question as to whether our current welfare system, which was designed in the 20th century, is sustainable in the 21st century.” It sounds like in the May budget we can expect some significant changes to the welfare system.
BURKE: Brace yourself for the broken promises, that’s exactly what Joe Hockey has flagged today. Tony Abbott for some years made point after point over an interview that Julia Gillard gave the day before the 2010 election. Well, the day before the 2013 election, Tony Abbott made a number of promises: No cuts to health, no cuts to education, no changes to pensions, no cuts to the ABC and SBS. That “no changes to pension" promise is about to be broken and that was made clear today by Joe Hockey.
VAN ONSELEN: What if these changes that look like they’re going to be in the May budget are in the out-years, and they’re only are to be put in effect post the next election, which means that in a sense the next election becomes their attempt to achieve a mandate, and then there’d be no broken promise this term.
BURKE: Well the promise was no changes. Full stop, no qualifications – no changes to pensions. If we go through the budget, and in the budget there are no announced changes to pensions then that promise may not have been broken. But that’s not the way Joe Hockey is talking today.
VAN ONSELEN: Well it sounds like they’re going to do more than that, but it may well be in the out years. A lot of speculation has been that they will frame it so that anything they look to push through this budget is post the next election by way of these sorts of announcements. That’s not unreasonable, is it?
BURKE: I think that’s a nuance that Tony Abbott did not flag at all before the election and I think that if you start getting into changes of that nature, and the best he’s got is to say “oh look it’s not until you actually retire, which is some time off therefor it’s not a broken promise”, I think he’ll be judged very harshly for that.
VAN ONSELEN: What about back to the actual issue though? Do you agree with Joe Hockey about the issue that was a system designed in the 20th century which is not financially sustainable in the 21st century? A lot of people think so.
BURKE: The principle with the age pension – and it’s for them to come up with a proposal, it’s not for us to second guess and then comment and provide an alternative before they’ve even delivered their first budget – but the principle that we took when we shifted the age pension from 65 to 67 out to about 2025 or thereabouts is the process where that gradually took place. Even then you have to be aware of the fact that it’s one thing for those of us who wear ties and collars to work who don’t have physical labour as the main part of our work, to say “oh look people are living longer, therefore later retirement’s a given.” For a whole lot of people in jobs that involve physical labour, a shift in the retirement age can be a very big deal and simply quoting statistics about how long people are living doesn’t actually get you there for the impact that this has on real people’s lives. And when you’re talking about the pension as well, you’re talking about those retirees who will have less – have smaller superannuation savings, and therefore are the people more likely to be in physical labour jobs.
PAUL KELLY: Does Labor accept the warning given by Treasury Secretary Martin Parkinson that we face a decade of deficits and therefore there must be a new round of restraint on the spending side? Does Labor accept that general proposition?
BURKE: Well the proposition that Treasury Secretary now works from is the figures contained in MYEFO. Not the figures contained in that mid-year economic forecast that was brought out at the end of last year radically changed a whole series of budget presumptions. Now quite properly the Treasury Secretary works from that, but Joe Hockey when he changed those budget presumptions, in one sweep of decisions, more than doubled the deficit - added $68 billion to the deficit, blew the figures out so that he could then be in a situation to say “the problem is much, much worse” - having cooked the books to do so - “now I’ll go about fixing it.”
VAN ONSELEN: Don’t both sides do that –
KELLY: I appreciate that argument, I appreciate that argument, but the argument from the Treasury Secretary relates to the structural problems of the budget, which go to spending commitments over the course of a decade, of the terms of trade, productivity, and economic growth. So do you accept the argument put there in structural terms that we do have a medium- to longer-term budgetary problem which needs to be addressed?
BURKE: I don’t accept, Paul, that you can separate the point I just made from the specific factors you just referred to. And I will refer to two of them. When you said spending growth, now one of the things Joe Hockey did in that mid-year document which is the only one he’ll keep quoting, was he removed the two per cent spending cap. A spending cap that’s since 2009 Labor had been following and following strictly. He took that out, and presumed it was no longer there. And when you do that and you just remove that discipline on the budget and remove your fiscal rules, then you do end up with a situation where spending keeps going up and up.
KELLY: So essentially you’re saying that you don’t agree with this analysis being put forward by the Treasury and the Government? You don’t actually agree with the dimensions of the fiscal problem that they talk about?
BURKE: The fiscal problem begins with abandoning a fiscal rule that Labor followed, which was the two per cent cap. If you keep the two per cent cap in, then you don’t have the problem that is being discussed openly and reflected in figures that have been released by the Treasurer. The second issue though, when you went through the different principles that the Secretary to Treasury had elaborated on, the second one was when you hit economic growth. Now the other thing that was done at the end of last year by the Treasurer when he released that document was to change how unemployment figures are dealt with in the budget. So there has always been the case that for years three and four of the forward estimates you would presume that unemployment returned to its trend figure of five per cent. What the Treasurer did was say “no no no, we’re going to presume that if it’s currently above trend, it stays there.” Now that hits your revenue figures, that also hits your expenditure figures, because if you’ve got people out of the workforce on different forms of benefits and falling lower on a whole series of things. That hits your economic growth.
VAN ONSELEN: But do you acknowledge that both sides have done their own version of this to suit the times that they were in? Joe Hockey may well doing that now, but in a similar way the Labor party did the same thing with the numbers in the lead up to the last election to try and project a surplus, because that was a constant requirement of the political narrative? Do you accept that?
BURKE: I think the weakness, the weakness though of that argument comes when you take in Peter Costello’s Charter of Budget Honesty because you’ve got a whole lot of budget figures, yes prepared by our own cabinet when we were there. You’ve got budget figures prepared by the new cabinet that Joe Hockey’s wanting to rely on, but you have the pre-election fiscal outlook, the one prepared by public servants themselves without the oversight or editing of any politicians. When I’ve said that Joe Hockey doubled the deficit, more than doubled the deficit, it’s not compared with documents that we’ve released, it’s documents prepared independently under the Charter of Budget Honesty and against the PEFO figures, the independent figures, it’s against those that Joe Hockey has changed the presumptions that they used, more than doubled the deficit, added $68 billion to it.
VAN ONSLEN: But you must be worried non-the-less that he’ll win the political battle on this one, rhetorically, because the Government after a period of strong deficits, will presumably present us with a budget that shows a pathway back to surplus even if it’s not immediately apparent and there chances of wining the public relations war on this one is higher than on your side I would have thought.
BURKE: Well that’s normally the argument given that the Government megaphone is louder than the Opposition megaphone. I’m not going to dispute the reality of them having a higher volume control than what we have. It’s also the case it’s for us to argue and explain exactly what Joe Hockey’s done so he does’t get away with it, just as with the welfare reference to explain exactly, and remind people exactly what Tony Abbott said the day before the election and how all of that is coming up for broken promises in the next few weeks.
KELLY: But we’re in a situation where real spending has been growing faster than real GDP, which seems by definition to suggest spending for a number of years has been too high. Do you reject that?
BURKE: The, two issues: One, when you’ve had an international downturn you’ve had some impacts on revenue where if you, some impacts on revenue happened with the international downturn, which no matter who’s in government those things just…
KELLY: Yes but I’m talking about spending. I’m talking about spending. Essentially the analysis is, the analysis is, that spending has been excessive for quite a considerable period of time. What I’m asking is whether you reject that or not?
BURKE: I think so long as you keep within the two per cent discipline that we had form 2009 on, that we kept within -
VAN ONSLEN: You didn’t always keep within it, I mean it was always there. you kept within it going into the budget but when we saw the actuals coming out the other side, quite often it was blown.
BURKE: From 2009 on the two per cent figures were kept to. Prior to that when you had the stimulus spending it’s true they weren’t kept to and there was a good reason they weren’t kept to then and a good employment outcome that Australian enjoyed that was not enjoyed by other countries. The other thing with respect to all of these figures is that they belie the fact that Australia has a triple-A credit rating from all three major credit rating agencies. Now if you are heading down a pathway where you’re having these sorts of alarmist revenue versus expenditure problems you would not get the triple-A credit rating that Australia enjoys and only achieved under Labor.
KELLY: What’s response to the view of another Treasury Secretary Ken Henry, former Treasury Secretary who says that the big spending commitments in the Labor last budget couldn’t be financed by the current tax system? He was quite blunt about that he said “we can’t finance these schemes”.
BURKE: The situation that you need to have is the discipline we showed to continue into the following years. Do I have evidence that we were able to make the tough spending decisions to make sure we stayed within our means? Yes. In that exact same period that I referred to, $130 billion in savings, in that exact same period. So tough decisions have to be made at different points, we made them. Where the Government is now heading, where the new Government is now heading is to make decisions in the new budget, which go completely against specific commitments that were made by the Prime Minister before people voted.
VAN ONSLEN: Can I ask you about the GST. Why does Labor have a fundamental unwillingness to even debate the issue of adjusting the GST? I’m not necessarily meaning ultimately support where that debate might end up, but even debate it?
BURKE: Well, we do debate it. We’re opposed to it going up. We’ve been opposed to changes to it, we’ve made commitments prior to elections that we would’t change it and I’ve got to say when I went through the list of things, I actually left one out in that quote from Tony Abbott and it was “No changes to the GST”. Day before the election you make that sort of commitment, particularly after three years campainging entirely on the need for a change of Government based on your view of what the then Prime Minister said the day before the previous election, you can’t just throw commitment like that away.
KELLY: Are there any limits to the increase in the personal income tax burden that Labor’s prepared to see as a result of refusing to modify the GST?
BURKE: On issues of specific budget measures we’re not going to get out in front of the budget being delivered. Right now the Government is strategically leaking a whole series of intended breaches of election promises and we intent to hold them to account on that. But while Finance might be in my title, there’s a word before it, which is ‘Shadow’ and I’m not going to come and advance and provide a Labor playbook of every Labor reaction to every possible policy.
KELLY: I understand that completely. But I guess the issue is does Labor accept that if you don’t touch the GST what this means is that more and more of the tax burden comes on the personal income tax side. I mean that obviously just by definition. Do you accept that proposition and do you accept there may be political risks in that?
BURKE: It depends on a whole series of other decisions Paul. GST revenue as you know finds its way through to the states so a strict match between GST revenue decisions you make there and other forms of taxation won’t always directly line up in its outcomes. Secondly, you’ve got the issue on whether or not you return to the level of fiscal discipline of that two per cent figure that Labor kept that Joe Hockey abandoned at the end of last year because there’s a direct connection obviously between revenue required and how disciplined you’re willing to be on your expenditure decisions.
VAN ONSLEN: Alright Tony Burke we are out of time, but I can’t let you go without a question I guess about Bronwyn Bishop. Before Parliament rose you had that motion, the next time you see her will be for the budget. Is Labor going to continue to make that same point about Bronwyn Bishop if she doesn’t change your view of the way she functions?
BURKE: The gateway for an Opposition to make sure that the people who voted for us are represented and are heard in Parliament is that you have an opportunity to have your say and that you have a fair umpire and the umpire or the ref should never be involved in sledging.
VAN ONSLEN: So is that a yes? You will continue to run a hard line on her position if you believe that’s what she’s doing?
BURKE: I actually don’t believe our line’s been particularly hard. I think our line has been an expectation that has been followed by almost every speaker in the history of the Parliament.
VAN ONSLEN: Alright Tony Burke Manager of Opposition Business and Shadow Finance Spokesperson thanks very much for your company.
BURKE: See you again.