5 March 2015
Transcript - #2015012, 2015

In the role of: Parliamentary Secretary to the Treasurer [23 December 2014 - 20 September 2015]

Interview with Julia Baird, David Miles, Fran Kelly and Stephen Koukoulas, The Drum, ABC

SUBJECTS: Intergenerational Report

BAIRD:

Parliamentary Secretary to the Treasurer, Kelly O’Dwyer, joins us. Welcome to The Drum.

O’DWYER:

It’s great to be with you Julia.

BAIRD:

Joe Hockey said some time ago that Australians would “fall off their chairs” reading this. Although there’s not much new in it. Did you fall off yours when you read the final report?

O’DWYER:

I think there is a huge amount in this document. Just the discussion that I’ve been hearing amongst your panelists is an indication as to some of the conversations that we need to have in living rooms right across Australia as a result of the information contained in the Intergenerational Report. The Intergenerational Report is a stock take. It’s a stock take of where we are today and where potentially we could be going into the future. It’s also an opportunity for us to look at what are the different paths on that journey. What choices do we need to make today to address the opportunities and the challenges that we know we are going to face with the changing of the demographics in our population and the increased costs associated with the Budget that will actually come from that. It’s a good starting point, I think, for a conversation to talk about what are some of those solutions going to look like. I’m very enthusiastic and optimistic about Australia’s future – I think every Australian should be – but I think that it is good to take stock of where we are and where we’re headed.

BAIRD:

And there’ve been some critics today who have spoken about one of the most striking difference, if you read through the last report in 2010, is that the emphasis that was placed on then about how important climate change is and how important it is that the Government address it and make it a crucial priority linked to our economic performance, productivity and future. Not so much in this report, how do you respond to that?

O’DWYER:

In Wayne Swan’s Intergenerational Report, which was brought down a couple of years early as a result, I think, of him wanting to fit it into his budget framework, climate change was addressed, I suppose, for the very first time in what was essentially a document that was an economic document that looked at changes to demography and changes to our fiscal position. We have included a section within the Intergenerational Report that looks at climate change. People will know that we have addressed this issue in a different way to the previous Labor Government. Those changes were announced in the Budget. We scrapped a Carbon Tax and instead wanted to put in place incentives for people to reduce emissions. We’re going forward with that scheme – that emissions reduction scheme. We have the same target as the Labor Party. We still want the same outcomes for our environment. We want to preserve that for our children…

BAIRD:

Sorry to interrupt Kelly, but why not so much in the Report?

O’DWYER:

It is in the Report, it is actually in the Report. It has been addressed in the Report. There are a lot of issues to address in this report; population changes, the blowouts that we’re going to see in our aged care, our health and our welfare budgets over the coming years when we consider that our population is ageing and that we’re going to have less people working for every person aged 65 and older. Dropping down from 7.5 people in the 1970s, in the mid-1970s, down to 2.7 in 2054. If we want to have the same services that are currently available to people today – just the same, that’s not looking at any new spending, then we are going to need to pay for that somehow. That’s part of the conversation that we’re having at the moment which is how we are going to manage some of these sorts of challenges because unless we address it today, we have no possibility of paying for it into the future and the Labor Party hasn’t come up with any solutions. They’re simply saying that we need to tax more, we need to keep on spending and need to keep on increasing debt. Well, we’ve shown with the projections that if you ever increase debt, if you were to go on the same trajectory that the Labor Party had set us on when we came into Government, we would have net debt to GDP at 122 per cent by 2054. Just to put that in context, Greece is 171 per cent and Spain is about 60 per cent so these are not targets we want to be hitting.

BAIRD:

Now I did just want to ask you about that because we were discussing earlier on the panel in terms of that this the first report that has actually charted what the country would have looked like under the previous Government’s policies. Now why do that given that it opens the report up so quickly and easily to the charges of partisanship as the ALP accused it of being today?

O’DWYER:

The Labor Party would like to dismiss everything that they find uncomfortable as critical and therefore to be dismissed without actually looking at the facts. I reject that view. I think that it’s very important to be upfront with the Australian people. Treasury have done an analysis based on where we were headed and where we are currently headed at the moment and where we could head on a different trajectory. There are three different pathways that have been modeled in the Intergenerational Report. I think the Australian people are sophisticated. They can actually look at these numbers and can see and workout for themselves as to whether or not they think that’s a good or bad thing and whether something needs to be done about it or not. We’re at the beginning of the conversation. As I said, I think this is a conversation that people will want to have in their living rooms right across the country and I think the Intergenerational Report – far from being a partisan document, is a very strong document that has been put together by Treasury, which the Treasurer has released today, and will stand a lot of scrutiny which is why the Labor Party won’t address the policy issues or the facts in it but will simply attack it.

MILES:

Kel, just in relation to the political side of it, of the looking at the past versus looking at the future, and I guess making a statement offering you the opportunity to comment on it, if this had been done in previous reports in the previous one by Wayne Swan it would have looked at the Howard Government, the previous one to that would have looked at the Howard Government and the one before that would have looked at the Howard Government, all of which would have shown a very different outcome I think than we saw in this report.

O’DWYER:

I think everyone would have been pretty happy to do and I’d be very happy to look at those figures…

KELLY:

I’m sorry to interrupt, if we had done that we would have looked into the blowout in middle-class welfare earlier and that would have set us up for at least one of the elements of this that is blowing out those deficits. That is something that as Peter Costello in some moments is happy to admit, they spent too much, they locked too much spending in that was and those tax cuts were part of the problem…

MILES:

He still locked spending in below income…

BAIRD:

…We’re getting into partisan discussion. Steven do you want to come in at this point?

KOUKOULAS:

I do. I think there is the biggest fraud, I wasn’t going to get partisan on this particular issue but there is a huge fraud that Kelly is talking about there – the 122 debt projection. That was the MYEFO number. There are four critical elements on why that number is an utter fraud. One is that it included the revenue that the Government, the Hockey as Treasurer gave to the RBA, the $9 billion, it excluded the revenue from the Carbon and Mining Taxes, and the biggest fudge of all, it included a one-off, the only time Treasury has projected the unemployment rate over the long-run to be six per cent. That’s how they got that 122 per cent. All of a sudden they’ve reverted back to the five per cent for the NAIRU. That’s worth 50 per cent of GDP - that one assumption change. So all of a sudden that 122 become 72 just on that one dodgy fudge.

BAIRD:

Kelly?

O’DWYER:

Well I think I’m going to need to respond to that because Steven, I know you’ve got a particular perspective having worked as an adviser for Julia Gillard on these sorts of economic issues, but MYEFO was actually the realistic set of figures. When we came into Government we actually had to look at what we needed to fund which was unfunded. Which was unfunded when coming into Government. Now the Reserve Bank, and I was Chair of the House of Reps Standing Committee on Economics at the time, had had striped out of it billions of dollars from their Reserve Bank Reserve Fund. That was not sustainable and it was against the advice of the Reserve Bank Governor…

KOUKOULAS:

It wasn’t striped out it was because the dollar was above parity…

O’DWYER:

Well Steven if you’ll let me finish. It was actually specifically, in letters, acknowledged publically against the advice of the Reserve Bank Governor. We needed to put an injection into the Reserve Bank Reserve Fund. That was something that the Governor did want to see and that’s something that we delivered. There were blowouts in border protection policy under the Labor Party. We had to put more than $1 billion straight into that. They hadn’t funded Gonski in WA, in Queensland, in the Northern Territory. Over $1.2 billion had to be put into that. So Steven, you can be a bit cute and sort of say that we were trying to load up MYEFO. The truth is we didn’t actually load up MYEFO with anything other than the unfunded promises that were promised by the previous Labor Government.

BAIRD:

Ok we’re going to have to end it there. Kelly O’Dwyer thank you so much for joining us tonight on The Drum.

O’DWYER:

Thank you.