25 August 2016
Transcript - #2016113, 2016

Interview with Ben Fordham, 2GB

SUBJECTS: Bloomberg Address - Staying the course – strengthening our resilience in uncertain economic times; Turnbull Government’s Defence industry transformation plan; making superannuation more sustainable; Glenn Wheeler

BEN FORDHAM:

Treasurer, good afternoon.

TREASURER:

G’day Ben.

FORDHAM:

Sounds like a pretty serious warning.

TREASURER:

Well, these are serious issues we have to contend with and they are not new, we’ve been saying this for some time. We’ve always been raising these issues and in the last parliament they pretty much fell on deaf ears. We’re going into this new parliament and there’s an opportunity for them to support the savings measures. So a saving is when you don’t spend as much. The opposition thinks is a saving it when you tax more. No. A Saving is when you don’t spend as much and that’s what’s necessary and in the worst case scenario where nothing gets past well, combined with things going a bit more pear shaped in the world and on top of that, new spending pressures coming on, well that’s where it takes you.

FORDHAM:

Well get to that trillion dollar threat, a little later. I just think as a starting point, as Treasurer if you can just tell us all where we are at the moment as far as our debt levels are concerned and how much we are forking out in interest payments to service that debt.

TREASURER:

Our gross debt is $430 billion. That’s interest payments of around $16 billion a year. So that as an expenditure, that’s almost as much as we spend on schools and hospitals and things of that nature. After health and education and social services, it’s one of the biggest line items on the Budget. The other issue is it’s growing Ben. It’s growing by about $6 billion a month, and about $1.4 billion every week this year. These figures have been disturbing us for some considerable time. This is why we say we’ve got to get the budget back into balance. You’ve got to do it by getting your expenditure back under control and keeping it at sustainable levels.

FORDHAM:

You do need to get people to visualise the size of the debt in a way don’t you. I know we’re paying $1.1 billion a month just on the interest. It’s around about $40m a day. And I think Alan Jones has got a good way of pointing it out, he chooses to say, look that’s three primary schools every single day.

TREASURER:

There’s many different ways you could say it. The overall debt at the moment is going to peak at about 30 per cent of our entire economy. It’s true that’s a lot less than other countries that are out there that are triple-A rated. That is very true. But the difference is, that Australia actually brings in a lot more capital from the rest of the world, and so we’re already in a position where we don’t have as much head room as say they do in Japan, or in China, or indeed in the United States or other places. So, we’ve always got to watch our debt much more carefully than other countries, and that’s why things like credit ratings get under pressure when our debt starts to move in the way it has. But we can do something about it now. In this parliament we can do something about it to ensure that these things don’t happen. Because as you say Ben, I don’t want my kids, you don’t want your kids to experience what certainly I did over 25 years ago when we had a recession. My grandparents’ generation, they experienced the worst depression the country’s ever seen.

FORDHAM:

You’re saying there is something we can do about it now. And when you say we, I gather you’re staring at the Labor party and the crossbenchers to say we need your help to pass these Budget savings measures $6b you’ve put forward. Just so we can be fair...

TREASURER:

Well that’s just the start…

FORDHAM:

I know, so we can be fair dinkum about what kind of dent that will only make a small dent on the debt. If you have $1.1 billion a month that we’re paying in interest on the debt, that means that in just six months we’ll spend more on interest on the debt than we’ll be saving via those $6 billion in budget savings measures.

TREASURER:

Well we’ve got $40 billion worth of measures that are improving the Budget which are coming before the parliament. The $6 billion that we’ve been talking about with the Labor Party are just the ones that they said that they would support before the election. So we thought; that’s a pretty good place to start. How about you guys vote for what you said you would vote for, when we reconvene, and that’s what we’re pursuing. But that is just the start. You’re absolutely right about that. On the Budget I handed down in May that is the sort of base case scenario we’re working from. Now that gets us back to a Budget balance just after the next four years. Once you’ve got the Budget back into balance then you can start doing something about how the debt is growing. But until you get the Budget into balance then your debt continues to rise.

FORDHAM:

When you talk about when we get the Budget back into balance, when is that?

TREASURER:

Well that’s in 20/21, currently that’s what’s projected. But that assumes we’re able to pass everything.

FORDHAM:

20/21 is five years away, and it’s based on a whole lot of things that, at the moment, are up in the air and you’d have to be optimistic, wouldn’t you, if you thought the cross benchers in the Labor Party are going to support you on all of those other savings, I think you said $40 billion worth when even on the six that they agreed to, the Labor Party, heading into the last election campaign they’re already crab walking on them.

TREASURER:

Well that’s right and that’s why I’m making this point, and that’s why I’m urging people to engage across the community and engage with the parliament.

FORDHAM:

What can we do as a community though, because it’s Government that has the spending problem isn’t it?

TREASURER:

The Government does have the spending problem, but out there in the community, tell your MPs to vote for changes in the Budget that improve savings. There should an expectation because if we’re unable to do that, then debt will start to be our master, and debt will continue to grow, and it will hit one of those tipping points within the next ten years where after that it’s very hard to tame. But what I’m saying is right now, we have the opportunity to try and address this. Over the next few years, our economy is performing well. And I am optimistic about our economy. But here are some storm clouds not that far ahead and we need to make the best use of these times to get Australia in the strongest possible position we can. So all the quibbling from the last parliament, all of the Budget sabotage we saw and the point scoring about not passing this or that, I think Australians expect this parliament just to get on with the job and fix the Budget. I don’t think they expect the parliament to take the lazy way of doing that by ‘oh we won’t cut spending, we’ll just tax everybody more.’

FORDHAM:

It seems like the warnings, I know what you’re saying you’re warning the public because you want the public to mention it to their MP, but it’s a long way to achieve your end means isn’t it, when really a lot of people get a bit confused when we’re hearing these warnings about our spending habits because they stop and they say ‘hang on a moment, they’re your spending habits’.

TREASURER:

They are. We would like to be spending less going forward in terms of how spending is growing Ben, but to do that I have to pass bills through the parliament to allow that to happen. I mean, you can’t just turn up to work every day as the Treasurer and say we’re not doing this or that anymore….

FORDHAM:

So it comes down to your negotiation skills.

TREASURER:

…So that’s what we’re working to do. We’re making that point I think very similar. But look, we’ve had 25 years of continuous economic growth in this country and that is an extraordinary achievement it didn’t happen by accident. It was a lot of hard work by millions of Australians. There was some really important reforms that were don’t by the Howard and Costello Government, and Paul Keating when he was Treasurer. He was the last one when there was that recession. What I’m saying is, he would talk back then about the recession we had to have. He talked about a banana republic. Now I don’t think we’re in that position, and I don’t want us to be in that position. I don’t want to be the Treasurer that has to say that. So that’s why I’m saying, let’s not go there. Let’s get this sorted now.

FORDHAM:

There must be some items in the Budget that you look at and think, oh if I could only put a line through that.

TREASURER:

There’s about $40 billion of them. I’m putting them in bills and they’re going to go to the parliament and I’d really like them to be supported.

FORDHAM:

When you have a look at our submarines, the $50 billion we’re spending on submarines. It’s a bit excessive isn’t it?

TREASURER:

Well Ben that’s a very major expenditure program which is going to have a huge impact not only in South Australia but the defence supply chain all around the country, and that’s going to be supporting jobs all around Australia. So the people who are going to benefit from the jobs that are coming from those spending programs, on that type of productive capacity for the country, it’s like building a road. It’s like building a port. I mean these are big projects which are going to generate jobs in Australia.

FORDHAM:

How are you going with your discussions about a compromise on superannuation? Will you lift the cap on lifetime contributions beyond that $500,000 mark, potentially to $750,000.

TREASURER:

Again Ben, Kelly O’Dwyer and I we’re talking directly with our colleagues about those things. That’s where I’ll have those conversations, not through the media but…

FORDHAM:

You’re open to a little bit of movement though?

TREASURER:

What’s most important is that we make sure that the superannuation system is sustainable for the future and that people who are saving today can continue to do that and that we don’t have tax concessions which go to those on very big balances and very big incomes so those on lower incomes have to pay higher taxes to afford it. One of the things that we’re doing it that we’re ensuring that people can catch up on their superannuation contributions. That people on lower incomes can be able to get better tax benefits on their contributions to their superannuation. So there’s a lot of positives in the package. We’ll keep working it, but the bottom line is it has to come in on the Budget that we outlined in May, and that’s exactly what we’ll do.

FORDHAM:

I know that you are the second most famous person in the Sutherland Shire in Sydney. Tomorrow there’s a lunch for Glenn Wheeler, the most famous member of the Sutherland Shire community, you’ll be there I understand?

TREASURER:

I will be there, and looking forward to it. I saw Glenn down at one of the last Sharks games that we won actually, and looking forward to a win on this weekend actually against the Roosters add the boys getting back on that winning streak, as we go into the semi’s. But it will be great to be there with Glenn, and Jane and the family, and to give him all the support. He was looking really good the last time I saw him.

FORDHAM:

He is looking good. We appreciate all of the support you’ve given him. You’ve been a great mate to Glenn Wheeler and we appreciate it and I’ll see you tomorrow at Sharkie’s for that lunch.

TREASURER:

See you then mate.