16 December 2015
Transcript - #2015080, 2015

In the role of: Minister for Small Business and Assistant Treasurer [21 September 2015 - 18 July 2016]

Interview with Michael McLaren, 2GB Drive

SUBJECTS: MYEFO

MCLAREN:

Kelly O'Dwyer, the Minister for Small Business and Assistant Treasurer joins me on the phone. Kelly, great to have your company this afternoon.

MINISTER O'DWYER:

Great to be with you Michael. I'm so pleased my plane was able to land in Sydney.

MCLAREN:

Well you're lucky and you've just popped out at a time the sun's coming out, although it's not looking too rosy on the economic front. The Prime Minister tells us that there's never been a more exciting time to be an Australian – I don't think Scott Morrison sees it like that though.

MINISTER O'DWYER:

Well, no, in fact both Scott Morrison and the Prime Minister are absolutely consistent in that the economy now is actually tracking in the right direction and our budget is working towards balance. All of the indicators are positive in that we are transitioning from the investment boom in the mining sector to a much more diversified and innovative economy and at the heart of this transition is the Government trying to get the economic settings right to unlock growth in our economy which will encourage jobs. We've seen some very encouraging figures around jobs growth. We've actually seen unemployment drop to around about 5 per cent, 5.8 per cent, which means that there are about 340 odd thousand more Australians who are in jobs today than there were a year ago.

MCLAREN:

Yeah, that transition seems pretty expensive though – you look at the way the economy is tracking, the debt figures let alone the interest bill surpassing $20 billion a year, this is a very expensive transition.

MINISTER O'DWYER:

Well, let me tell you, one of the great challenges that this Government was left with was the structural changes made around spending left to us by the previous Labor Government. They locked in huge growth in spending, which we've been able to pare back, we've been able to pare that back now to 1.8 per cent from around about 2.6 per cent. There's still more work to do on that. Which means that the underlying deficit now is actually going to contract from around 2.3 per cent of our gross domestic product to around about 0.7 per cent over the forward estimates. Now what does that really mean? That is actually significant because that's lower than the average underlying cash balance that we've had over the last 30 years, which means…

MCLAREN:

Ok but when you look at the numbers then, it might be contracting in time, but it's a very long time away. There will be some intergenerational debt thrown into the mix but equally, you could really cut harder than is being envisaged – not just in the last budget but indeed in the MYEFO, what are we talking about? A $400 billion economy and what, you're going to save about $400 million it's scrap.

MINISTER O'DWYER:

Well what we're doing is we're making sure that we're making very sensible prudent, rational and responsible decisions regarding expenditure. We're making sure that we're getting the most out of every taxpayer dollar that we have. The Labor Party would like us to simply increase taxes to chase their ever increased spending, we don't think that's the right thing to do. We think we have to make sure we control our spending and for any of the decisions that the Government has made since the last budget around spending measures, we have more than offset those measures which means that we are more than living within our means.

MCLAREN:

What about some of those measures? Let's look for example at a recent – I think it was two weeks ago wasn't it? The revamped childcare policy was announced – now a lot of that is good because the means testing is becoming more stringent but still, if we're serious about reigning in this debt, we've got families earning more than $340,000 per annum, still able to claim a 20 per cent rebate on childcare, now they shouldn't get a cent. Why would you need one cent in rebate if you're pulling in $340,000 as a couple per annum. I mean if we were serious, they would get nothing because they don't need it.

MINISTER O'DWYER:

Well it wasn't means tested before then and we've now actually put a cap on it.

MCLAREN:

But it should be nothing.

MINISTER O'DWYER:

One thing that's really important to understand though, is with childcare, and changes around childcare making it more affordable, more accessible and more flexible for families, means that we can give people more choices about whether they go back to work or whether they increase the amount of work they do.

MCLAREN:

Yeah but Kelly, if a couple are earning $340,000 per annum, they don't need extra choices from Government, they've got plenty of choices in their wallet don't they?

MINISTER O'DWYER:

They're also paying a much higher taxes as well I'd hasten to add.

MCLAREN:

Well that doesn't matter.

MINISTER O'DWYER:

The point I'd make here is that we need to create the right sort of policies to give the right sort of incentives and in terms of our childcare package, what we're focused around is giving those people who want to be able to work more and therefore invest more and save more, the ability to do that. But it's not just childcare alone. We also need to look at our system holistically, we need to look at our taxation system as well and interaction between our tax and transfer system. At the moment a lot of people make the decision not to go back into the workforce or work longer hours because they're simply penalised so much by higher tax rates.

MCLAREN:

That's fair. Look I'm not attacking you or the Government, I appreciate you've been lumped with the most awful burden imaginable when you took office two and a bit years ago by the Labor Party and a lot of the debt, a lot of the expenditure, a lot of the programmes are only getting worse with time, you've inherited that but, you know, we've got to look at it line by line and you guys are now in the power chair. I mean the childcare thing's one but for example, recently we've had a billion dollars redirected basically out of the aid budget to go and appease the greenies in Paris, now if we're really short of cash and we're going to fiddle with the aid budget, why don't we take a billion dollars of that back into consolidated revenue?

MINISTER O'DWYER:

We've made some very prudent measures and we've made some significant cuts in our expenditure and we've done that in a way that we think is responsible and is in keeping with what the community expects of Government.

MCLAREN:

To be honest, I don't think too many in the community expect the Liberal Party or the National Party to be tipping a billion dollars into some climate scheme.

MINISTER O'DWYER:

Well, is there more work to be done though Michael? Absolutely there's more work to be done. Part of the problem here though Michael is that a number of the spending measures left to us by the previous Government were structural and they actually built up over time to become even greater.

MCLAREN:

Yeah, but that one wasn't was it? That was a Turnbull-Bishop announcement.

MINISTER O'DWYER:

No, the commitments around foreign aid for instance, and we have significantly cut foreign aid – we're still a very generous donor around foreign aid but we have made significant cuts to foreign aid because there was a huge exponential growth in spending on foreign aid which we simply couldn't shovel out the door fast enough. We said that wasn't responsible and over successive budgets we've made some cuts in that area whilst still acknowledging that we, as a first world nation, need to make a contribution there but it needs to be balanced against our need to make sure our budget can come to balance and that we are responsible for making decisions around taxpayer dollars.

MCLAREN:

That's fair enough. Looking at Paris once again, you've got a situation where over there you've got a whole bunch of people lead by that Christiana Figueres women, who I think is absolutely bonkers, going around basically trying to wipe out the coal industry, wipe out the fossil fuel industry, now to be blunt, if it wasn't for the fossil fuel industry our economy would certainly be a much more sick puppy than it is at the moment. Surely Australia should really be giving that a really wide birth. I mean what we are encouraging by being rather placating over there in Paris is the gradual burn-down of the fossil fuel industry – the backbone of the economy aren't we?

MINISTER O'DWYER:

Well, no, we haven't said that. I mean, you'd be very clear that one of the first things we did on coming into government was to get rid of the Carbon Tax which was a huge impost on our economy which was basically making our economy completely and utterly uncompetitive with the rest of the world. You rightly point out that in Australia we're less than 1.5 per cent of the world's global emissions and we are very much a commodity country. We've been very reliant on our commodities, in fact, so much so that that's actually been built into the budget parameters. In 2009 for instance, the iron ore price was upwards of around $180 a tonne in US dollars, now it's around $35 a tonne.

REPORTER/JOURNALIST:

On that of course, you've got…

MINISTER O'DWYER:

It's changed very dramatically which is why we have…

REPORTER/JOURNALIST:

And negatively for the economy but you've got Treasury modelling that for the last, well the last three/four years, has been so horribly out. I mean what about $100 billion out over four years. Is someone going to look at Treasury modelling?

MINISTER O'DWYER:

You know, the problem is it's very difficult to model these sorts of things. It's very much outside our control in terms of the world prices on iron ore and it does have a very significant impact on our economy. Now we believe that we have made some very conservative estimates, we believe it to be very important to have conservative estimates in your budget and we've made sure that we've done that not only in terms of commodity prices but also in terms of projections for growth as well. We've made sure that we've really bailed that back so that we can have confidence in the figures that are over the forward estimates. We can't guarantee it but we can have more confidence because we've been more conservative.

REPORTER/JOURNALIST:

Just finally, as I said, a lot of the problem isn't you or the Government. A lot of the problem is what you inherited, I don't envy you one bit – the muck you've been given – but part of the situation is the Senate, I mean that's the way it is for quite a bit of time yet depending on when the election's going to be called and what sort of an election it will be. How are you guys going to work on the Senate? I think what is it, at least $13 billion of savings measures blocked. I mean a lot of the people up there are simply putting the nation's fortune and future at risk for their own political expediency. How are you going to deal with those people?

MINISTER O'DWYER:

We're dealing with the cross bench Senators by talking to them about the importance of these measures. We're trying to engage with the Greens on these sorts of issues as well and we have sometimes success with them, sometimes not. Unfortunately the Labor Party have been pretty reckless when it comes to our economy. Having been the architects of a lot of this structural spending, they've not been quick to come to the party to help with a lot of the solution. Their solution is tax increases which they've announced – which doesn't really touch the size of what it is that they locked in in terms of growth in spending – but we will continue to try and work with anyone who is willing to help us get the budget back under control, to make sure that we are repaying debt over time, to make sure that we're not passing on intergenerational debt to our children because it's not responsible to do that. We're going to do that in a way that doesn't put a handbrake on our growth and doesn't put a handbrake on jobs creation.

REPORTER/JOURNALIST:

We all wish you the best of luck. Kelly O'Dwyer thank you for joining us on the programme this afternoon.

MINISTER O'DWYER:

Thanks so much Michael.