ABC Melbourne Drive, Fight Club Interview with Rafael Epstein

Release Date: 
18 March 2015

Rafael Epstein: Alan Tudge I’ll start with you. A lot of the conversation is around the budget, the budget deficit. Do you accept responsibility for the fact that debt and deficit has increased while you’ve been in power?

Alan Tudge: The deficit hasn’t increased but the debt has. Now, the debt will continue to increase until we are back into a surplus. That’s just the basic mathematics…

Rafael Epstein: I thought the deficit got worse in the MYEFO statement by $10 billion to $40 billion. Isn’t that right?

Alan Tudge: The deficit is not at record levels as it was under the Labor government.

Rafael Epstein: Did the budget deficit get worse between the budget last May and MYEFO?

Alan Tudge: It did, that is the case, in part because commodity prices have dropped which means that we’re forecasting less company revenue. That was the main reason for the overall deficit increasing.

But the point I’d make is that the debt wont decrease until we are back in surplus and the savings that we have already made and legislated through will see us get pretty close to surplus in about five years’ time. There’s been a lot of hard work, and people know that, over the last twelve months to get to that position.

We’re not out of the woods yet, but we’ve now got the debt and deficit to be a manageable problem whereas what we inherited from the Labor Party was an unmanageable debt trajectory.

Rafael Epstein: Can I just ask you to answer that question – do you accept responsibility for the debt and deficit going up?

Alan Tudge: As I said, the debt will continue to go up until we are back in surplus. We are doing absolutely everything that we can to get back to surplus within a reasonable time period and that is, we’ll be close to that within five years now.

We’ve had a lot of savings measures blocked in the Senate as you know by the Labor Party and the crossbenchers. Had those savings measures gone through the Senate then we’d be much closer to being back in surplus and therefore starting to reduce the debt than we are today.

Of course that includes about $5 billion worth of savings measures which the Labor party actually put up when they were in government but didn’t legislate and now they’re blocking.

Rafael Epstein: I’m not sure that’s an answer, but Anna Burke I do want to ask you this question. You haven’t really helped, have you, as a party? I don’t know if it’s necessarily the obligation of the opposition to help a government, but it is the obligation of an opposition to deal with a problem everyone says we have with the budget.

Anna Burke: Well this government doubled the deficit in the first twelve months. Giving back $9 billion to the Reserve Bank they didn’t ask for, they didn’t need and they didn’t want, on one of their first outings was just a ridiculous thing to have done and has caused problems to the budget overall.

Rafael Epstein: If a small deficit isn’t a major problem, then that’s not a major issue for you, is it?

Anna Burke: If there’s an issue with deficit, then they’re going to double the deficit overnight with a measure that’s not needed, then that’s a bad measure.

Labor’s not going to apologise for not agreeing to measures from the previous budget that are going to hurt the families’ bottom line, that are actually going to cause grief throughout the economy, throughout the society.

We’re not going to apologise for not allowing the co-payment of Medicare to go through or $100,000 degrees. They are not measures that are sustainable or good for the economy anyway.

Rafael Epstein: Alan Tudge does have a point there, which was money that you took from universities to fund Gonski which you were criticised for. That’s a saving you proposed in government and have gone back on. Is he right or wrong in saying that?

Anna Burke: There wasn’t a saving in that measure. It was a projected increase to higher education that we were deferring out to fund Gonski. Now we’re not going to agree…

Rafael Epstein: (inaudible) the federal government talking about (inaudible)…

Alan Tudge: $5 billion worth.

Anna Burke: The issue here is the government’s not going to agree to the payment of Gonski in the fifth and sixth year where those savings and measures were going to. We’re happy to pass on savings that are actually going to go to the measures that we were proposing. We had a proposal, we had a saving.

Alan Tudge: That’s just not true.

Anna Burke: They’re not going to pass those measures, so why would we pass on the savings?

Rafael Epstein: Briefly Alan Tudge?

Alan Tudge: That’s just not true Raf.

Had we stuck with all of the Labor policies, we were basically on a pathway following Greece’s debt trajectory all the way up to 122 percent of debt to GDP, which is similar to what Greece is today.

Rafael Epstein: Whose calculation is that? Can you just explain where that comes from, Alan Tudge?

Alan Tudge: That comes from the Treasury figures. We documented that in the Intergenerational Report. That was the trajectory under Labor. Now, we make no apology to try to get that under control to be a manageable situation.

Many of the measures have already been through the Parliament. But there’s $5 billion worth of measures which the Labor party actually put through when they were in government. They budgeted for it, they spent against it but they didn’t legislate for it.

We’re now trying to legislate for those and even those measures are being blocked.

Anna Burke: Can we also stop insulting all the Greeks in Melbourne? I think it’s one of these things that my community really resents, all those Greeks in Oakleigh, really resents being targeted in this way.

Rafael Epstein: Well I’m sorry if they are offended, but it’s a fact they had a massive level of debt.

Alan Tudge: They’ve had a massive economic crisis and it is a fact. They’ve had a massive economic crisis, they’ve had recession for six years, unemployment at 26 perecent (inaudible)…

Anna Burke: This might be called ‘Fight Club’ but I don’t think the listeners actually like us to go into grievous bodily harm. What I was actually getting to was this talking down of our economy. It’s actually doing damage to our economy because we are nowhere near the levels of debt that Greece is experiencing.

Rafael Epstein: Alan Tudge I want to ask you about the debt level figures in a moment. But look, 1300 222 774 is the phone number. You may have a question for Alan Tudge or Anna Burke.

Alan, the Intergenerational Report I think is pretty clearly government numbers. I don’t want to confuse people too much but the Prime Minister today talking about a potential surplus in four or five years. Isn’t it the case the last time Treasury gave us independent figures, which is in the lead up to the 2013 election, then they said that the Labor government’s settings were heading for a surplus before 2020.

So the last time Treasury had a look at this without government setting the parameters, they were actually predicting Labor settings to get us to a surplus, I admit that’s more than 12 months ago, but they were predicting a surplus ahead of where the Prime Minister now says we will reach one.

Alan Tudge: Raf, I recall when Wayne Swan delivered his famous budget, when was it, in 2011 or 2012 when he said ‘the four budget surpluses I announce tonight’. Those surpluses never eventuated.

Rafael Epstein: I’m not asking you about what politicians say. I’m asking you about the, I don’t want to get into the technical language, but Treasury has a look at figures, they are independent; it’s different to the Intergenerational Report figures.

Last time they looked at it, they had us getting to surplus sooner than the Prime Minister says we will now get there. Is that right or wrong?

Alan Tudge: Listen, the parameters have in part changes because commodity prices have collapsed since that point in time. Now, there was also an enormous amount of additional expenditure which was put in place in the last year of the Labor Government. So, they are the new figures that we’re dealing with.

The Intergenerational Report is the most recent set of Treasury projections and what they project is what the debt would look like if we just stuck with Labor’s policies.

Rafael Epstein: There’s a lot of unfair assumptions in those projections.

Alan Tudge: They are reasonable assumptions which have been made by the Treasury and what they show is that had we stuck with Labor’s policies, our debt would continue to climb and would in fact follow the path which Greece has been on since 1980; that is, slowly increasing debt levels all the way up to about 122 percent of GDP.

Greece had their economic crisis when they were just over 100 percent of GDP despite having been warned their debt levels were too high for decades leading up to that point, my point, our point, is that we don’t want to follow that path. Let’s get control of the government debt today.

Rafael Epstein: I don’t actually quite understand that comparison. Let’s leave aside what it means for Japan, Britain, America and every other country that has got worse debt than us. What I’m not clear about is this – last year’s budget was too drastic, you overreached, you say, I think Joe Hockey’s words were you tried to do four years of work in one year, so you’re scaling back a lot of that.

This year’s budget’s going to be boring. So last year was too much, this year you’re going to go really easily yet, for some reason we’re on this path to some Greek-style situation. It’s another example of contradictory messages coming from the government, isn’t it?

Alan Tudge: No, we were on the path to a Greek style situation had we not made any decisions over the last 18 months. Had we just stuck with every single one of Labor’s policies with legislated growth in so many different programs, with expenditure forecast to grow by 3.7 percent per annum ongoing, then we would have got to Greek levels of debt.

What we have done already is made a lot of decisions which have made us on a much different trajectory. It actually does get us back close to surplus in five years’ time. It makes the debt a manageable proposition going forward. There’s still a lot of work to do, but it is manageable.

Had every measure that we had put up in last year’s budget gone through, then we would be back in surplus quite quickly and would be paying off the debt quite quickly.

Rafael Epstein: Anna Burke, if you can address the Greek levels of debt but also a prediction, if I can get this from you I’m not sure, are we actually going to get significant spending and savings measures from the opposition or are you going to follow what Tony Abbott did and basically not tell us much until we got to an election?

Anna Burke: What we’ve got at the moment is scaremongering on the government’s part to justify their unfair budget that they still haven’t been able to pass and we’re now seven to eight weeks off the next budget which is going to be boring but is predictably going to have massive cuts.

We’re not projecting to Greek-style debt levels.

Rafael Epstein: No, but we’ve got big problems.

Anna Burke: Australia’s debt has always been manageable. That’s the thing that everybody has failed to understand. We’ve got debt, yes. Most households have got debt. So long as you can manage it, it’s okay. So there were   measures that Labor put in place when we were last in government.

There’s measures we’ve announced and are looking at into the future and we will be taking things to the next election.

We will announce things. We’ve announced directions about where we stand, things that we won’t compromise on. But also, as I’ve said numerous times before, this is about a revenue issue. It’s about raising more money to ensure we can provide the services our community needs.

Rafael Epstein: You haven’t proposed any major changes to the budget bottom line though. I’m not saying that you should, I’m asking if you think you will before we get to an election campaign.

Anna Burke: Yes, we will. But it’s not an election campaign anytime soon. This is a government, they don’t seem to think they are a government; you only need to sit through Question Time or what they keep saying, it’s their responsibility now and they should be taking it and dealing appropriately with measures and the crossbenchers in the Senate to achieve outcomes that are both beneficial to the economy and to the public. Medicare co-payments and $100,000 degrees are not.

Alan Tudge: Raf, can I just pick up on the points about it being a revenue problem…

Anna Burke: No.

Alan Tudge: The expenditure projections were to go from about 25 percent of GDP up to 37 percent.

For revenue to follow that, you would have to increase every tax by 50 percent. All of your income taxes by 50 percent, all of the company taxes by 50 percent, every other tax by 50 percent, just to deal with it on the revenue side.

Anna Burke: That is just completely wrong and is not justified.

Rafael Epstein: Alan Tudge, without confusing things, the assumptions you are using there, if I’m correct, are assumptions in the Intergenerational Report, where you had Labor continually giving people tax cuts every year for decades and not changing any other tax measure. It’s not really a sensible set of figures to use, is it?

Alan Tudge: The assumptions are on the expenditure side where they had real expenditure growing by 3.7 percent. Now that means that overall expenditure grows year on year on year from what is presently about 25 percent of GDP to 37 percent of GDP.

If you want revenues to match that, by definition revenues have to be 50 percent higher. That means 50 percent more tax than what we have today. The Labor Party love taxes (inaudible)…

Rafael Epstein: Let’s take this back to the beginning Alan Tudge, I’m going to go to traffic in a moment but I’m going to see if I can get a yes or a no from you on my initial question. Do you accept responsibility for the increased debt and deficit or not? Yes or no?

Alan Tudge: The debt will go up until we can get back to surplus. That’s by definition. We are doing whatever we possibly can Raf, as you know, as your listeners know, to get us back into surplus.

Rafael Epstein: I do want to ask questions on the East West and we’ll get to a few callers.

[traffic and news break]

Rafael Epstein: Let’s go to a few quick calls. Aussie has called from Bayswater. Aussie, see if you can make it brief. Go for it.

Caller Aussie: Yes good afternoon, how are you? Look one thing I’ve got to say, after one and a half years of government to continue blaming everything on Labor is just not on. When Labor left government, we still have a AAA rating. How can we still be going the same way as Greece? It’s impossible.

Now secondly, why do we keep on calling the unfair budget. Only the people who can least afford it, they are the ones targeted. How about for a change we’d like to target big companies.

Rafael Epstein: So tax big companies more, is that what you are saying?

Caller Aussie: No, just what they have to pay.

Rafael Epstein: Compliance?

Caller Aussie: Absolutely. We keep on saying we can’t do that, otherwise they’ll take the business overseas. We can work that out.

Rafael Epstein: Okay, compliance. Aussie, you raise a good point. I’ll start with you Alan Tudge. Is there anything else you can do? I think you employed extra people at the ATO. Have you done enough?

Alan Tudge: On big companies to pay tax, is that what the question is?

Rafael Epstein: Yes.

Alan Tudge: Listen, there’s a set of laws that are in place. If companies are not paying the right amount of tax the regulators will come down on them like a tonne of bricks. There’s an issue in terms of some multinational companies not paying the tax where they raise the revenue and we’re dealing with that through the G20 process. It’s an international issue and we’re going to have a set of recommendations…..(interrupted)

Rafael Epstein: Is that going to reap significant reward?

Alan Tudge: Well we hope it will. It’s been worked through pretty cooperatively at the G20 level and I think at the end of this year there’s going to be a set of proposals on the table to ensure that, in essence, the proposition being that if you raise the revenue in a certain country, then you should also pay the tax in that country.

Rafael Epstein: Let’s get a call from Terry and I’ll put his question to Anna Burke, let’s see how we go. Terry what’s your query or your comment? Go for it.

Caller Terry: I’m not an economist by any means. What’s wrong with a GST increase? What’s everyone running scared from there? It’s been that level since it was ever introduced. I don’t understand.

Rafael Epstein: OK, what’s wrong with a GST increase? Anna Burke is there anything wrong with expanding the scope or the rate?

Anna Burke:

It’s a retrogressive tax that actually hits the poor the hardest. So you need to look at how it impacts individuals across the board and doing more on multinationals and compliance is probably a fairer, more equitable way to raise revenue.

Rafael Epstein: It’s probably easier to raise it with a GST isn’t it?

Anna Burke: Well certainly it probably is, but is it equitable, is it fair is it justifiable? We’ll wait and see what the Government does within respect of its white paper and I think looking at reasonable tax measures across the board, most people say they’re not unhappy to pay their fair share, so long as everyone else is paying their fair share as well.

Rafael Epstein: Alan Tudge I know the East West is a favourite topic of yours. Let me ask you this question. I think there is a billion and a half of federal funds sitting in state government coffers. If you’re so upset with the Andrews Government approach, are you going to take the money away?

Alan Tudge: We want money to stay in Victoria and to go towards Victorian infrastructure but we want that billion dollars most importantly to go towards the building of the East West Link.

Rafael Epstein: But it’s not going to is it?

Alan Tudge: Well the contracts haven’t been broken yet and while those contracts are still alive we’re going to put as much pressure as possible on the Andrews Government to just deliver upon the contract.

Rafael Epstein: So if the contracts broken will you take the contracts away?

Alan Tudge: The alternative to breaking the contract is they’ll have to spend about a billion dollars just to break the contract which will just on the scrapheap so why not spend that money and actually get a decent piece of infrastructure built.

Rafael Epstein: So will you take the money away if they pay too much compensation? I just wonder how it will work.

Alan Tudge: Well that’s a hypothetical question. The contract has not been broken. It is a live contract. That money’s there for the East West Link.

Rafael Epstein: Anna Burke do you think they will take the money away?

Anna Burke: Just thinking about the East West Link I’m drawn back to the opening story on the news about the girl who was killed in Doncaster and my mind is going to that family. My child was at Canterbury Girls School until last year. I just wanted to put out there my thoughts are with those families and the people in the eastern suburbs who’ve had that terrible news today. I don’t want to make a downer but it is actually on my mind. Box Hill where I live isn’t too far away from that park.

Look a contract entered into two weeks before an election is a disgrace. The fact that two weeks before…

Rafael Epstein: I think it might’ve been six.

Anna Burke: Oh well two- the finalisation of it.

Rafael Epstein: Two weeks before the caretaker period perhaps.

Anna Burke: Yeah well that’s when government ends.

Rafael Epstein: Understood.

Anna Burke: That’s when government ends, the caretaker period. How worse had they’d actually done it during the caretaker period, the opposition making it clear they were not supporting the building of the East West Link…

Rafael Epstein: You’re a long-time observer Anna Burke, will they take the money away? What do you think?

Anna Burke: I think they will. I think it’s a crying shame because there are very important infrastructure issues within our community that desperately need to be done, much needs to be done in rail transport and that money could go to projects on the books now and assist everybody getting around Victoria a lot better than the East West Tunnel would.

Rafael Epstein: I’ll put a brief question to both of you. Try and make it brief because I want to cross to the Bureau but it’s a big topic. Anna Burke are you happy with the metadata law?

Anna Burke: I’ve got reservations about the metadata law. I’m pleased that the sense was seen by all parties and that the legislation went to a committee and the committee worked through that very well and on a bipartisan manner and came up with some changes.

It actually has put protections in place that didn’t exist now. So there’s lots of people who can get hold of that metadata. The RSPCA can get hold of that metadata. Why they can is beyond my comprehension. But I still think we need greater explanation out to the community about how it’s going to work and what the costs are going to be.

Rafael Epstein: I don’t think the legislation’s public yet. Alan Tudge are you comfortable with that legislation?

Alan Tudge: I think it is a good package of legislation now, and there was some very good work in the Joint Select Committee on Intelligence Matters – a bipartisan committee – which went through the draft form of legislation and I think proposed 33 amendments from memory and those amendments have been incorporated into the Act. I think it’s improved the Act and overall this will make a difference to keeping Australia safe and dealing with some of the things you wish didn’t occur in our society like child exploitation and the like.

It’s a very important piece of legislation and a good one I think.

Rafael Epstein: OK, two MP’s whose seats cover the east of Melbourne, at least in part. Alan Tudge and Anna Burke, thanks a lot.