TRANSCRIPT
Of
SENATOR MITCH FIFIELD
Sky News AM Agenda
Ashleigh Gillon & Senator Mark Arbib
2 February 2009
8:30am
E & OE
SUBJECTS: Budget deficit, economic stimulus, infrastructure spending, tax cuts, employment
ASHLEIGH GILLON:
Welcome to AM Agenda. Well we now know we are headed for a deficit. But, in a bid to avoid a recession, Cabinet today is expected to sign off on the Government’s second stimulus package. Joining me now here in Canberra is Senator’s Mark Arbib and Mitch Fifield. Thank you both for your time, good morning.
SENATOR MARK ARBIB:
Good morning.
SENATOR MITCH FIFIELD:
Good morning Ashleigh.
GILLON:
We’ll get to your predictions for what the stimulus package will include shortly, but first, the Treasurer confirmed yesterday after just one year in office the Rudd Government is facing a Budget deficit. Here’s how Wayne Swan broke the news yesterday.
TREASURER WAYNE SWAN:
Well certainly, the global recession will give Australia a temporary deficit. But of course that is happening around the world, and of course we are much better positioned than other countries.
GILLON:
Senator Arbib, when Wayne Swan took the reins, of the economy just a year ago, he would never have dreamed in a million years that in such a short space of time he would be telling Australians that we were headed for a deficit.
ARBIB:
Well we never would have thought that we would have had such extraordinary times. When you look what has happened in the United States a serious recession, when you look at what is happening in Japan a serious recession, throughout Europe serious recession. And this is a global recession now, its not just a global banking crisis, it’s a global recession, and that is having huge effects, not just on the developed world, look at the developing world look at China, our biggest trading partner is now having a massive slowdown, job cuts everywhere, factories closing, and its having a huge effect on our economy, and its not just China, Japan, our other second biggest trading partner, as well. Recessions, slowdown, and obviously as the Treasurer pointed out yesterday, that’s going to cut $50 billion off our company revenue, our company tax revenue, which means a deficit, and there’s nothing we can do about it. We’ve been driven into deficit by what is happening overseas globally, and certainly by the global, the recession.
GILLON:
Senator Fifield, it’s difficult isn’t it, for the Opposition to argue against a deficit when you’ve got the International Monetary Fund and the country’s top economists saying that its actually the responsible action to take at this time?
FIFIELD:
Well what a surprise, a deficit. Wayne Swan has been softening up the public for the best part of six months for a deficit. And yesterday he said that the deficit is the ‘medicine we need’ echoes of the ‘recession we had to have’. It is very important that we appreciate that this deficit isn’t because of the global financial crisis. This deficit is because of decisions taken by this Government. Certainly, falling revenues and rising welfare payments could well take the Budget into a deficit and exacerbate a deficit. But this Government has had the Budget on track for a deficit for quite some time. Now, the Government talks a lot about the automatic stabilisers and having the Budget in surplus over the course of the economic cycle, but what that means is that when the economy is growing, the Budget is in surplus. When the economy is in recession, the Budget is in deficit. Now this Government has had us on track for a deficit while the economy is still growing, and I think that is a very important fact to bear in mind. Obviously I am not contending for a second that we mightn’t find ourselves in a recession, and that falling revenues and rising welfare payments see you in deficit and exacerbate that, but the important point is, that we have been on track for a deficit apart from those factors. Apart from those factors this Government has had the Budget on track for a deficit.
GILLON:
Senator Fifield, can you seriously sit there and say that the global financial crisis has nothing to do with this deficit, because we’re looking at the reasons for it A. a major loss in tax revenues, because of the global financial crisis, and B. the Government’s spending packages, because of the global financial crisis.
FIFIELD:
Putting aside the global financial crisis…
GILLON:
You can’t put aside the global financial crisis…
FIFIELD:
No, no, no, what I’m saying is…you can. Apart from that, this Government still would have had this Budget in deficit
ARBIB:
Hang on a second…
FIFIELD:
Would still have had this Budget in deficit.
GILLON:
Lets see what Mark has to say.
ARBIB:
You just said that we have put the country, the Budget into deficit, and that is completely untrue.
FIFIELD:
Your spending decisions…
ARBIB:
Hang on Mitch, I know your New Years resolution is to interrupt me, but just let me get this one out please.
FIFIELD:
Not at all.
ARBIB:
What you are saying is that somehow, we’ve driven it in. There is no doubt whatsoever that the global recession is hitting this country hard like it is hitting all countries hard. You just gloss over it, you never mentioned the global effects once. Look at our trading partners five out of ten of our top trading partners are now in recession, and the remainder are on the brink of recession. I mean, these are extraordinary times. IMF figures are predicting global growth of 0.2%, of course its going to have a huge effect our bottom line, and that is why the Treasurer came out yesterday and explained it. $50 billion been taken away from our company revenues, he talked about $40 billion the last time, during the MYEFO period, he talked about another $40 billion about going then too from global factors. There is no doubt about it the global recession, what is happening to our trading partners is driving us into deficit. For Mitch here to be somehow saying that we’ve done it, is misleading and totally partisan and it just goes to show this is exactly how they’ve been playing their politics…
FIFIELD:
Two points…
ARBIB:
Just one sec. They started off by supporting the guarantee, the banking guarantee, now you’ve flipped on that one and you’re saying you don’t support it. You started off supporting the stimulus; you sat in this chair Mitch supporting the stimulus and now you don’t support the stimulus this is how you’re playing your politics Malcolm Turnbull is a total opportunist.
GILLON:
Senator Fifield I do just want to show you a bit of what the Shadow Treasurer Julie Bishop had to say on the Sky News Business channel this morning. She was making the point that it is one thing to go into deficit, the big question is what is the Governments plan to get out of it. Let’s have a look.
JULIE BISHOP:
And when the Government says its going into deficit, albeit on a temporary basis, its important for us to hold the Government to account to what they mean by temporary. And we had the unedifying spectacle yesterday of the Assistant Treasurer not being able to articulate what the Government means by a temporary deficit, and all this talk about it being up to the economic cycle will dictate when the Government will come out of deficit. Well in our experience Labor Governments come out of deficit when a Coalition Government is elected.
GILLON:
We would have thought that yesterday when Wayne Swan made these comments about Australia going into deficit, he may have been armed with some information about how we were going to get out of it, but Mitch Fifield, is it realistic to expect the Government to know the length of this deficit, just how its going to take to turn around in the end?
FIFIELD:
Well the Government could give us some undertakings that they will have a surplus at some time in this parliamentary term, that they will have a Budget surplus at some point during their term of office. They talk about having a Budget surplus over the course of the economic cycle, but the Government won’t define what that is that could be five years, ten years, fifteen years. Now I’ll pre-empt Mark Mark will say we had a Budget deficit while we were in office, true, but we had a Budget surplus the year before, and we had a Budget surplus the year after, and we paid down all the debt that’s a temporary Budget deficit. So I don’t think it’s unreasonable to expect the Government to put some broad markers around this. What constitutes a temporary deficit is it one year, two years, three years? Is it a parliamentary term, is it two parliamentary terms? I don’t think it is unreasonable to expect the Government to put some markers around it. But just going back to the point we were making before about the Budget deficit the reason that I say that we would have had a deficit regardless under this Government is this Government was talking the Australian economy down at the start of last year, before the effects of the economic crisis really hit home, that effects business, that effects revenues, that effects the employment level, that effects social welfare payments, so that is a factor. Also, the Government has got to own their own spending decisions which have taken the Budget to the edge of deficit that’s the point I was making this Government had the Budget on a track to deficit before the effects of the global financial crisis hit. I’m not denying that the global financial crisis has an effect, but this Government was on track for deficit regardless.
GILLON:
Mark Arbib, is there a plan to get Australia out of a deficit, is there any guarantee that this could be back on track in five years, eight years what time period are we looking at, is there any way to tell?
ARBIB:
The largest factor is obviously global conditions, and no one can tell you, no one can say how bad this thing is going to get. And every time you think that you’ve reached the bottom in terms of the financial crisis things get worse in the United States and the UK at the moment they are talking about nationalising all of the banks, I mean, who would have ever thought that we’d get to that sort of proposition?
GILLON:
Please tell us that the Government has some plan to get the Budget out of deficit, we don’t expect you to say exactly what it is.
ARBIB:
Well of course there is, because its been our plan from day one, and Mitch talks about us talking down the economy, we haven’t been, we’ve been boosting up the economy…
FIFIELD:
What about the inflation genie, out of the bottle?
ARBIB:
We’ve been boosting up the economy, look at the stimulus package $10.4 billion introduced last October, and it is working. It is working; I mean I’ve heard Julie Bishop and Malcolm Turnbull running down the stimulus package look at retail figures, this morning retail figures were released – $6.5 pumped into the economy from Boxing Day to the end of January, ahead of expectations from the retailers. Look at housing figures, housing figures showed an almost 18% increase in home buyers grants in November alone. Woolworths, Michael Luscombe that they have seen activity in the areas where there are huge numbers of working families. So our plan is to stimulate the economy, and that is why we did it once and we are looking at doing it again. Our plan is to stimulate to create activity, to protect jobs. We’ve got a plan to protect jobs, the other side, what they’re about, is just leaving it to the market, there is a real ideological divide here. We are intervening in the marketplace, stimulating the economy, the opposition…
FIFIELD:
You used to like markets, Mark…
ARBIB:
…I still like markets Mitch. But at the same time as that the Government…
FIFIELD:
You’re not sounding very solid.
ARBIB:
The Government has to intervene, extraordinary times, to stimulate it. On your side its all about leave it to the market, let the market rip, the Gordon Gekko’s of the world are out there waiting for the scavenger funds and to pick up those good buys
FIFIELD:
It is possible to blow billions and billions and billions of dollars without any economic benefit. Now the Government keeps saying they’re out there acting decisively and I readily concede that the Government did act decisively with the first stimulus package. But it is possible to be decisively right, but it is also possible to be decisively wrong.
GILLON:
Is there any evidence that the last $10.4 billion stimulus package didn’t work?
FIFIELD:
Well is there any evidence that it has so far?
GILLON:
Mark Arbib, is there any evidence?
ARBIB:
Well I just went through the evidence. Retail figures out today $6.5 billion ahead of retailers expectations, housing figures up, 18% for first home buyers, Woolworths are saying it…
FIFIELD:
I’ve got a different measure…
ARBIB:
But Mitch you sat in this chair and you supported it…
FIFIELD:
…employment. Employment is really the determinant as to whether these packages have been effective. If they have been effective, then we will see unemployment stay where it is, we’ll see the number of people out of jobs not increase in Australia, if the package has been effective, that’s what we’ll see happen. I don’t know what other measure there is.
ARBIB:
Well I just went through the other measures.
FIFIELD:
Well no, I think the measure is jobs, that is the measure. And you can blow $10 billion and have no effect…
ARBIB:
So you know oppose…
FIFIELD:
It might allow a Government to say we are doing something.
GILLON:
We’re seeing all sorts of figures coming out, but what does seem very clear after Wayne Swan coming out yesterday and saying that we are looking at a deficit is that we don’t have the latest figures the last mid year economic and fiscal outlook which was released in November, I think, seems to be completely out of date by now, why hasn’t the Government come out this year and said this is where the economy is looking, this where we are at. Isn’t that needed?
ARBIB:
We’ll we did have the MYEFO economic figures late November December, I mean they are out.
GILLON:
A lot has changed since then.
ARBIB:
Of course a lot has changed since then. No one has been able to forecast how quickly the world economy was going to deteriorate, nobody has, now is the time for action. We’ve stimulated the economy once, now we’re going to do it again. Now in terms of jobs, Mitch was talking about unemployment, and Malcolm Turnbull is out there every day saying ‘Jobs, Jobs, Jobs’, what is his plan for jobs? What’s Malcolm Turnbull’s plan? One is leave it to the market, second, set up a website. I mean, this is his only plan to create jobs, is to set up a website. That’s it. What we’re doing is actively intervening, stimulating the economy to create activity, protecting, supporting jobs…
FIFIELD:
And re-regulating the labour market.
GILLON:
Well Mitch Fifield what is the oppositions plan to create jobs? Does Mark have a point there?
FIFIELD:
Which you know, and I know, will lead to increased unemployment in Australia.
ARBIB:
He’s talking about his plan right here which is to bring back Workchoices. Here we go again. Comon Mitch, when you talk about regulating and deregulating the labour market, you’re talking about the individual contracts that you brought through with Workchoices. You gave a speech a couple of weeks ago, and I admire you for your honesty, because you’re the only one in the Coalition who has been willing to stand up and put it on the record, when you said we should not run away from our core beliefs and ideology. And again you were relating that to Workchoices.
GILLON:
Mark lets let Mitch respond to your claims that the opposition has no plan for jobs.
ARBIB:
I’d love him to.
FIFIELD:
Warwick McKibbin, Reserve Bank director, today is in the papers saying that re-regulating the labour market, at this time, at a time of economic pressure is crazy, its madness. You know, business knows, I know that re-regulating the labour market will cost jobs. So on the one hand, you’re saying that you’ll stimulate the economy and try and create jobs that way, on the other hand you’re re-regulating the labour market in such as way that you’ll destroy jobs. That’s completely inconsistent. If you think your stimulus package will help increase jobs, then why are you re-regulating the labour market? Can you tell me Mark that re-regulating the labour market will increase jobs in Australia?
ARBIB:
Now this is an hugely important debate, what our plan is…
FIFIELD:
Can you tell me…
ARBIB:
Hang on, I will tell you. Our plan is to provide fairness in the workplace fairness that the opposition took away through Workchoices, there is no doubt about it, fairness. But at the same time as that we are providing employers with flexibility. This is not about re-regulation, this is about providing balance in the workplace and that is what the Government is providing. And it is pretty clear from what Mitch as said and from Nick Minchin and others, Tony Abbott, they want to return to the bad old days of Workchoices. They are using the economic crisis as an excuse to try to bring back those individual AWA contracts which the Australian population completely repudiated.
GILLON:
We do need to go to a very quick break but coming up, we look at the Governments proposed second economic stimulus package, whats going to be in it, is tax relief on the cards? We’ll discuss that with the Senators in just a couple of minutes.
BREAK
GILLON:
Welcome back to AM Agenda joining me here in Canberra, Senator Mark Arbib and Senator Mitch Fifield. Speculation of course is mounting today that the Government is about to announce the second economic stimulus package, perhaps as soon as later today, we hear that Cabinet is going to be signing off on this today. The big question seems to be whether or not tax relief is going to be part of that package the Opposition has been arguing for ‘broad and sweeping’ tax cuts, but yesterday there seemed to be some slight mixed messages coming from the Opposition leader and the Shadow Treasurer let’s have a look.
MALCOLM TURNBULL:
You’ve got to look at the most effective tax cuts, the best targeted ones
JULIE BISHOP:
Tax cuts, broad and sweeping tax cuts that will increase the tax base and increase tax revenue
GILLON:
Senator Fifield which is it? Narrow tax cuts needed, broad tax cuts needed, are any needed at all?
FIFIELD:
Well I’m always a fan of tax cuts and the broader the better, but that’s the Mitch philosophy. Just back to the first stimulus package for a second. My concern with the second stimulus package is that it could be throwing good money after bad I would have preferred the first stimuls package to have brought forward tax cuts, to put real money in peoples pockets to boost spending in the economy, and also infrastructure to help improve the long term productive capacity of the nation. That didn’t happen. My concern with the second stimulus package is again, I don’t want to see good money thrown after bad, I always lean towards tax cuts rather than towards hand outs there is ample evidence that tax cuts lead to a greater boost. Before I make a call on the second stimulus what I want to see is updated forecasts. MYEFO is completely out of date, we need a new economic forecast update. We need to know what Treasury’s view is in terms of unemployment, we need to know what Treasury’s view is as to what effect the first stimulus package will have. How can we make a call on the second stimulus package when we don’t even have advice from Treasury about the likely effect of the first stimulus package. To me that would seem pretty basic. So the very first thing we need is updated Treasury forecasts and so far there is no undertaking from the Government that we will have that.
GILLON:
Ok, that’s the Mitch philosophy, what’s the Mark philosophy, that we can look forward to? It seems that we are getting a lot of hints about tax cuts for low income earners as well as mix of infrastructure spending on education and skills training, that sort of thing. Do you think that’s the sort of thing we’ll be looking at, can you give us any more hints?
ARBIB:
I can only tell you what I saw yesterday when the Treasurer was speaking on the Nine program, in terms of, he was talking about a mixed package that has short term impacts, medium term impacts and long term impacts. And he was talking about at the centre of it, nation building, and that means infrastructure. And I think that that is a very, very sound way to be approaching a stimulus package to be looking to stimulate in the short term and that’s what the IMF says really needs to happen, you need a short term stimulus, and they favour infrastructure and direct spending rather than tax cuts because tax cuts are over a longer period and they don’t provide the short term effect. But at the same time as that we’ve got to be looking over the horizon, looking at our productive capacity and that’s where infrastructure spending is so, so important, to ensure that we are actually productive, to ensure that when the economy picks up we are ready to compete on the global stage, and infrastructure will protect jobs.
GILLON:
Can we trust though, the states to handle those funds? I’m thinking here in particular New South Wales, some of these states don’t have a good track record when it comes to completing projects efficiently and on time do you think they can be trusted with these extra funds?
FIFIELD:
Joe Tripodi, can we trust him?
ARBIB:
Well we’ve got Infrastructure Australia, its been set up, its and independent body and that is going to be the group that is responsible for infrastructure. And of course they’ll be putting in place processes and checks and balances to ensure, if infrastructure is committed to and promised, that the states, and also local Governments remember local Government is also involved here, the Government in its second, in its first stimulus provided $300 million to local councils so that they can get infrastructure underway themselves, so Infrastructure Australia, the independent body, will be responsible for ensuring that we actually get on with the job and that we actually deliver on what we are saying. But from what the Treasurer was saying, that is not going to be the whole package. I mean the package will have other measures too its not just going to be the Infrastructure spending, there’s obviously going to be spending to get consumers spending, and moving as well. So we’ve got to keep it in perspective.
GILLON:
Mitch you keep pointing out that we don’t know the full effects yet of the first stimulus package. Are you suggesting then that we do need to wait some time, wait until we have the full figures and see the full impact before the second package?
FIFIELD:
Well we don’t have to wait, the Government should release the updated figures when they announce the stimulus package. Or better still, give us the updated figures today, so that we can know what the lay of the land is. That’s what they should do. Just back to infrastructure spending which Mark was talking about, I’ve got some worries about infrastructure spending and not because I think that infrastructure spending is a bad thing, but because Infrastructure Australia, which Mark keeps saying is the independent body, they will make independent recommendations to the Government, which is good, but the Government has said that they are not going to release the advice that Infrastructure Australia as to the projects that they recommended. So we will have no way of knowing if the projects that the Government funds are chosen purely for political reasons, purely to protect federal seats, or purely to help particular dysfunctional State Labor Governments. We’re not going to know that because the Government has said that they are not going to release the advice of Infrastructure Australia as to which projects, should be funded.
GILLON:
Is pork barrelling a concern here Mark?
ARBIB:
Well that is exactly why if you look at their time in Government, the Coalition pork barrelled left, right and centre.
CROSSTALK
ARBIB:
And that is why we set up Infrastructure Australia, for that very reason. To stop pork barrelling, to ensure there was an independent body involved in the process and the analysing…
FIFIELD:
To give a cover.
ARBIB:
But just returning to something Mitch said in terms of figures, and waiting for the figures. We’ve got the IMF figures, the IMF figures are out and they are absolutely abysmal. You’re looking at world growth of 0.2%.
FIFIELD:
What’s wrong with Ken Henry’s figures? I want to see Ken Henry’s figures.
ARBIB:
And what we have to do as a Government, and what we have to do from day one is to stay ahead of the curve. To stay ahead of what is happening internationally to ensure that our economy is insulated as much as possible from the global effects. That’s what the strategy has been so far and it has been largely worked, and we’re not going to change now and sit on our hands and wait for figures into the never, never, because that will mean a loss of jobs.
FIFIELD:
You don’t have to wait for them, you’re the Government, you can just release the figures. You’re the Government.
ARBIB:
And what Mitch is talking about is to sit on our hands and see jobs go out the back door. That is not what we are going to do, we are going to act, take action to stimulate the economy.
FIFIELD:
Mark you are the Government. Ask for the figures.
GILLON:
It is going to be a fascinating week. Welcome back to Canberra glad to see you both here in fine form as usual. We look forward to talking to you again next week.
ENDS