Topics: Economic reform, Budget, GST reform, iron ore prices, corporate profit shifting.

E&OE…

KIERAN GILBERT

This is AM Agenda, thanks for your company this morning. With me now is Liberal frontbencher, the Parliamentary Secretary for Education, Senator Scott Ryan and Labor frontbencher, Shadow Parliamentary Secretary for Foreign Affairs Matt Thistlethwaite. Scott first to you, on this issue, this warning or call to arms, however you want to describe it from the business community. All of the peak bodies are unified in their message to the Parliament that it is basically not stepping up to the plate when it comes to reform.

SENATOR RYAN

Well I think what the statement from the business groups does is that it reminds us of the scale of the reform challenge. Reform is a constant challenge; we need to be constantly upgrading our policy settings as the world is a changing place. It also reminds us of the scale of the challenge that this Government faced when it first got elected. I mean I came into politics Kieran, to use the phrase of the statement, standing on the giants of the 80s and 90s and 2000s reform era. It is something that inspired me in politics, and people of my age in their early 40s have had a much better life because of those reform challenges, we need to continue them. The statement points out, that when in opposition in the 80s, that the Coalition supported a lot of the Labor Party’s reforms. It points out that in the 90s the opposition didn’t support the Howard and Costello reforms. That is the challenge we face now, we are trying to change our policy settings, we are trying to make the budget and the economy more sustainable to give our kids a better opportunity, but sadly we are facing a great deal of intransience from the Labor Party and the Greens.

GILBERT

It’s sobering, the message from all of the bodies including the Food and Grocery Council, all of the peak employer groups Matt Thistlethwaite are basically saying Labor needs to have a more nuanced approach here and if someone is hurt by the budget or misses out in some way that that should not necessarily rule out reform, that it needs to be seen in totality when you look at fairness.

MATT THISTLETHWAITE

Well Kieran, the business community is bearing the brunt of the chaos and dysfunction of the Abbott Government. We’ve seen since the last election business confidence fall by 10 per cent, we have seen unemployment rise to its highest level since 2002, this is all effecting business in Australia. Labor when we were in Government had a clear plan for reform, and indeed we were delivering a lot of those reforms; reform of our education system, delivering an emissions trading scheme to ensure we are tackling climate change, reform of the tax base, ensuring that we are investing in the industries of the future, a plan to deal with Asia that is not simply based on selling the minerals and agricultural exports through our Australia in the Asian Century White Paper. All of our great reforms were ditched by the Abbott Government when they came to Government and replaced by chaos and dysfunction, and that is why you have the business up in arms.

GILBERT

Senator Ryan, one of my viewers, Peter Oataway, has sent a message via twitter saying that basically the Government is being held to ransom by minor parties and independents from the smaller states, he refers to Tasmania and South Australia. Is it time now for reform of the electoral system as well so when governments are elected with a reform plan that they can actually deliver on it?

RYAN

Let’s make it clear that the cross benchers in the Senate only have the capacity to block legislation when the Labor Party votes ‘no’ as well. That statement is a very important statement from business groups because it does give due credit to the John Howard led opposition, and even the John Hewson led opposition in the 80s and 90s for supporting difficult reforms put forward by the Hawke and Keating governments. It does point out that Howard and Costello had to go it alone. But we’ve faced the problem that even when we have tried to implement the promises that Labor made at the last election, some of the funding cut decisions they made, some of the reallocation of resources that Labor announced in their last budget and prior to the election, Labor won’t even vote for the policies that they announced. So when we have tried to be a little bi-partisan in that sense, Matt Thistlethwaite and his colleagues have changed tact.

GILBERT

But Senator Ryan, before I get to Matt Thistlethwaite on that and I will put that directly to him, the question from Kate Carnell and others is does the Government have the backbone to push ahead with reform even in the face of opposition like Mr Howard did with the GST? That sort of political guts to push ahead with tough reform, when the PM said this was going to be a dull budget it has got the business community worried.

RYAN

I think people need to not over read the use of that one word. I think the Prime Minister and Treasurer have made clear that making the budget sustainable is something that is the key priority of this Government. Now, we haven’t been successful in legislating some of the announcements from last year, and what the Prime Minister and Treasurer have said is that they accept that they are not going to progress and that we need to try and bring the budget into balance through different ways. But we have to control spending; we have to control the rate of growth in spending. And even in my portfolio area, we have taken the difficult decision to reform higher education and we are going to keep trying to do that, and also to say that the promises that Labor made with Gonski funding that were years five and six that had no funding attached to them at all, we have said that they are not sustainable and can’t go ahead. So we have taken difficult decisions and we are going to continue to do so.

GILBERT

Do you accept Matt Thistlethwaite that Labor can’t just push ahead with this small target approach? Particularly, and I guess with contradictions inherent in your position when it comes to savings, as Senator Ryan pointed out, you are blocking things that you proposed previously in government, in an environment economically where things do need to be reined in you are blocking things things that you once had proposed. The other point, a looming contradiction, is Labor’s position on the pension. You want fairness and equity on the superannuation front yet you are not willing to rein in some of the pension spend when it comes to those who are still receiving part pensions despite having millions in private wealth.

THISTLETHWAITE
Kieran, Labor has passed 20 billion dollars’ worth of the Government’s savings through the Parliament.

GILBERT

It’s only a drop in the ocean.

THISTLETHWAITE

When we were in Government we passed 180 billion dollars’ worth of savings. So there is 200 billion dollars’ worth of savings to our budget that Labor has responded positively to. But what we won’t be involved in is allowing the Government to break election commitments. Clearly the Prime Minister said before the last election that there would be no cuts to health and education, no changes to the pension and no changes to ABC or SBS, and then he went ahead and clearly did that. Now, it is incumbent upon a good opposition to hold the Government to account to the promises they make.

GILBERT

It is also incumbent upon a good opposition to have economic responsibility, and you are going to have to deal with this one day or another when you are back in Government one day, and that is the sustainability of the pension with an ageing population. Why doesn’t the opposition at least consider what the Government is putting forward here about some sort of reform on the pension itself?

THISTLETHWAITE

Kieran, we have been responsible in this area. Take for instance multinational profit shifting, and there is a story on the front page of many of the papers today of many companies shifting profits overseas. Labor developed a plan, and we announced that a couple of weeks ago, and it has been announced in consultation with tax experts in the OECD, it has been fully costed by the independent Parliamentary Budget Office.

GILBERT

It is one policy

THISTLETHWAITE

I suspect the Abbott Government didn’t even read it before they ruled it out. The day we released it they ruled it out. Now that is an area that we can work together that is a big problem for the budget, and it was ruled out without even reading it by the Abbott Government. What hope is there when you have a Government that is intransigent like that?

GILBERT

Well the problem is both sides of politics are ruling out things like the GST before, as Kate Carnell says, before it gets to morning tea. Now there is a mistaken view that the Federal Government can’t act unilaterally here over the states and legislate a change in the GST. The Prime Minister continues to say that all of the states have to be on board. You know Senator Ryan that the Federal Parliament can legislate a change in the GST and override that agreement. That is fact and the Government could make this a commitment if you saw it necessary, instead you say that this should be in the hands of the opposition, that Bill Shorten controls the GST. Where is the political bravery in that?

RYAN

I think to be fair, a law made by Parliament can be unmade and amended by Parliament in a constitutional sense Kieran, you are quite correct. However I think part of the political settlement over the GST in the late 1990s and then when it was legislated with the support of the Australian Democrats after the ‘98 election, was that outline that John Howard and Peter Costello took to the election, that unlike other GSTs in a lot of other countries the money is collected by one level of government and completely and wholly passed on to another level of government. Now that is unique about our GST and John Howard and Peter Costello said that they wanted to give the states those resources, but at the same time they wanted to give people confidence that there was not going to be a constant ratcheting up of it. So therefore the political settlement, if you like, requires the support of states and territories in order for that rate to be changed.

GILBERT

Yes but the political settlement, as you would know, was flawed because of various negotiations done to get it through. Does the political settlement need a rethink given the role model the New Zealand Government has shown in terms of its approach to the consumption tax, they had a constructive debate and its economy is doing very well, not just on the back of that reform but also workplace reform and other reforms as well.

RYAN

The New Zealand economy is also very different; its economy is much more exposed to a few key global markets. The growth for example in dairy prices has made a huge difference to New Zealand’s economy, its labour market is very different, its budget is very different because it is a unitary state and it doesn’t have states to deal with; it is also a much smaller economy. I mean it is an economy smaller than the size of Victoria. I think we have to be careful about comparing apples with oranges here. When you are undertaking serious reform on a larger scale here in Australia, it’s a large country with diverse interests and different types of economies in different parts of the country and I remember it was not that long ago that New Zealand was saying that the Australian reform model was superior, so these things do wax and wane a little bit. New Zealand has been very successful in managing natural disasters like the Christchurch earthquake and also global economy swings and roundabouts. But it has made its budget sustainable, that’s the key thing.

GILBERT

It has also had some good leadership through John Key making the case.

RYAN

I think John Key has been a fantastic Prime Minister and he has managed to bring the New Zealand budget back into surplus and to take advantage of the increasing commodity prices for those areas that New Zealand trades.

GILBERT

Ok, Matt Thistlethwaite just finally to you on this warning, on the front page of the Financial Review Ross Garnaut saying that China steel output may fall 25 per cent. This is someone who knows a fair bit about China, a former ambassador to China in the 80s, he has maintained very strong links to that country and economy and he is an eminent economist. Does Labor get it that the budget situation is dire? That you may have to cop some things that you otherwise might not have proposed in order to get the budget back onto an even keel?

THISTLETHWAITE

Labor certainly does get it Kieran and that is why we had a plan for reform that we were delivering when we were in Government. Take engagement with Asia, Labor foresaw that you couldn’t simply base the relationship on selling minerals to China, that one day the super profits that we were earning from selling those minerals was going to trend downwards. That is occurring now, and we have seen that reflected in the iron ore price and it is reflected in the budget. We developed a plan for broader engagement with Asia on jobs of the future and in renewable energy. We should be talking with China at the moment about linking our emission trading scheme, about creating the biggest carbon market in the world, the jobs that would flow from the industries of the future, diversifying our economy and the jobs of the future. But you can’t under this Government, they are the only Government in the world to move backwards on climate change. China has a clear plan for where they’re going on this particular issue. When Labor was in Government we had a clear plan to work with China on this issue, but it has been completely dismantled by their Government and we are wearing the consequences of it.

GILBERT

Matt Thistlethwaite, Senator Ryan, thank you for your time this morning.

(ENDS)