10 February 2015
Transcript - #2015019, 2015

Interview with Leigh Sales, 7.30 Report

LEIGH SALES:

Treasurer, thank you for joining us.

TREASURER:

Great to be with you, Leigh.

LEIGH SALES:

I’d like to start with the submarine project. Did the Prime Minster attempt to give the impression of a possible deal for an Australian submarine builder in order to cement a couple of South Australian votes for his leadership?

TREASURER:

No, you are asking me to make a comment. I can’t make a comment on that other than to say that we are going through a proper process to get the submarines that Australia needs. We could have the best subs – we need to have the best submarines, to be able to defend our nation.

LEIGH SALES:

So, it is $20-40 billion project. So, as Treasurer you would be familiar with the process…

TREASURER:

Yes. 

LEIGH SALES:

On the 2nd of December last year, you said that it was not realistic to build new submarines in Australia, and that quote, ‘we don’t have time to go through a speculation process’. What’s changed?

TREASURER:

A speculation process – that is exactly right – everyone was speculating about what was going to happen. The fact is that six years ago, the decision should have been made about Australian submarines. Now, the Collins Class submarines are being withdrawn from the middle of next decade. Australia is quite vulnerable [inaudible] vulnerable without submarines. We need them as deterrence; particularly given we have an enormous economic risk associated with our gas pipelines all around the coastline.

LEIGH SALES:

So, given that importance, what is the process? And is it not at odds when you have said, a couple of months ago, ‘we don’t have time to go through a speculation process and people putting forward their ideas for stuff they have never built before’? And now it appears that the Prime Minister said we are having an open process around that?

TREASURER:

No, the Prime Minister said we are going to have a competitive process. The Australian Submarine Corporation can participate in that process but it is hugely important, Leigh, that we get on with the job of building submarines to protect our coastline. They are an important deterrence.

LEIGH SALES:

So, what is exactly is a competitive evaluation process and how does it differ from an open competitive tender?

TREASURER:

Open tenders are very different. I mean, we are not purchasing company chairs or tables. We are purchasing the most sophisticated piece of military equipment and it is not a production line, if you like. When you go to tender in something that is so strategic, you have got to be careful about the information you disclose because it might in fact reveal to people who lose out in the tender, certain secrets about your strategic operation.

LEIGH SALES:

So, what is a competitive evaluation process?

TREASURER:

Everyone will have the right to participate in a competitive process – that’s what the Prime Minister said. We are currently going through, through National Security Committee and through Budget committees, we are going through the proper process of evaluating who has the capacity to build the submarines in what is an extraordinarily short period of time because the previous Government didn’t have the courage to make the decisions.

LEIGH SALES:

But we already know from what you said in December that you don’t believe that the Australian firms do have the capacity or the capability.

TREASURER:

They have got the opportunity now to participate – there is no doubt about that, but it is hugely important that we get on with the job of building the submarines. We cannot have second class submarines. By the middle of this century, 50 per cent of the world’s submarines will be in our region and we cannot have an inferior quality submarine.

LEIGH SALES:

Have they now got that opportunity purely because the Prime Minister wanted to shore up some votes for his leadership, in South Australia?

TREASURER:

No, no, it was always going to be the case and we are continuing with that process.

LEIGH SALES:

Let’s turn to the broader Budget strategy. Are you now at odds with the Prime Minister over whether or not to proceed with your 2014 Budget strategy or whether to dump it?

TREASURER:

No, not at all. We are at a tipping point for the nation. We cannot continue to go on borrowing $100 million a day as a government just to pay our daily bills because if we continue down that path, we are going to leave future Australians with a lesser quality of life and I am not going to pass the buck to future generations to pay for my quality of life today.

LEIGH SALES:

And you have been making that argument repeatedly and you have said, in fact even on Sunday, ‘if we don’t go ahead with our higher education reforms and fixing up Medicare, if we don’t go ahead with welfare changes, then that $100 million a day is going to get even higher. But the Prime Minister said that the Government has been too bold and ambitious and that it won’t be putting up legislation that involves unwinnable fights with the Senate. So, it gives the impression that you are saying, well we must push on with what we are doing and the Prime Minister is saying, we must change course.

TREASURER:

We are endeavoring to encourage the Labor Party and the Labor-controlled Senate to come to the table to negotiate [inaudible].

LEIGH SALES:

So, just to be clear, are we persisting with those policies?

TREASURER:

We are – we are, because we have no choice Leigh, we have no choice. Economic growth is not going to deliver a surplus [inaudible] Australia’s Government starts to live within its means.

LEIGH SALES:

So, the Government is still going to pursue a Medicare co-payment in some form? It is still going to pursue higher education changes?

TREASURER:

Let’s go through them individually. In Medicare, I think it is unfair – I think it is unfair, that when I go to visit a doctor, I shouldn’t have to make a contribution. Now you, myself, the Prime Minister, Bill Shorten, we have the capacity to contribute something when we go to visit a doctor. If we do that, we can make Medicare more sustainable in the future so that in five years or 10 years’ time, when there is an essential drug that will save a person’s life, the nation can afford it.

LEIGH SALES:

So, can we be taking from that then that you will be targeting high-income earners only for the Medicare co-payment?

TREASURER:

We have already announced in relation to the co-payment that anyone who is a pensioner, anyone with a healthcare card, children, they do not pay a dollar. So, those people who are not in that grouping of people would make a contribution. Now, I don’t think that is unfair. I think it is actually fair that we all make a contribution, as higher-income people, to our own healthcare.

LEIGH SALES:

So, just to be completely clear, you are saying, everything you took to the 2014 Budget, you still are going to be pursuing as best you can?

TREASURER:

Well, we have always done as best we can. Unfortunately, the Labor-controlled Senate is just ignoring the challenges that Australia faces.

LEIGH SALES:

You’ve said that we have to rein in spending. The Prime Minister said recently that he wants to make childcare more affordable. Isn’t one of the few ways you can make childcare more affordable, to spend more money on it? Isn’t there a contradiction between what you are saying and that goal?

TREASURER:

The Independent Productivity Commission undertook a review of childcare just last year. We have that Report. We have been consulting widely. The new Social Services Minister Scott Morrison is working on that response. It is hugely important that we get childcare right…

LEIGH SALES:

But you have to spend money on it…

TREASURER:

Well, we do. We are spending a lot of money on it but we have got to get it right. We have got to make sure…

LEIGH SALES:

But you’re not in a position to be spending money on it?

TREASURER:

We have no choice because if we do not get more people into work and give them flexible and affordable childcare, you are going to see more and more women drop out of the workforce and that’s going to have quite a significant negative impact on the Australian economy.

LEIGH SALES:

Is this not though, a confusing shift for the public? Because we have been hearing for a long time, ‘we have to not only have new spending but rein in spending,’ but now we are hearing, ‘well we are going to have to do some spending on childcare’.

TREASURER:

Yeah, there are things we have to spend money on in order to…

LEIGH SALES:

But is that not confusing?

TREASURER:

Well, I think Australians understand that. There are some things we have to spend money on where we have no choice and where it actually strengthens our nation. Now, we have spent a lot of money, for example, on national security – Australians expect that. We have to find that money. We spent a lot of money on defence in order to deal with the threat in the Middle East and what it means for Australia; that costs money. So, government is not inert – you do get these challenges come along. You have to find the money to pay for them and what the Prime Minister is saying emphatically, what I’m saying emphatically is, whenever we have new spending, we have to find savings in order to pay for it.

LEIGH SALES:

Do you agree with the Prime Minister that the Government has been too bold and ambitious and that you bit of more than you could chew?

TREASURER:

It has been a challenging time but we inherited a mess.

LEIGH SALES:

But let’s just stick with what you decided to [inaudible]….

TREASURER:

Sure, sure, sure.

LEIGH SALES:

Do you agree with the Prime Minister that you were too bold and ambitious?

TREASURER:

I think maybe he is right, yes I do. I think we were but we – at the time, had no choice and…

LEIGH SALES:

And what were the decisions that were an overreach then?

TREASURER:

There is an argument that we shouldn’t have put everything into the Budget immediately; that we should have staggered it during the course of the year...

LEIGH SALES:

And do you think that argument’s right?

TREASURER:

Yeah, I am saying it, so [inaudible].

LEIGH SALES:

You said there’s an argument, you didn’t say, ‘I think.’

TREASURER:

But look, we have no choice, Leigh. I mean, we cannot continue to ignore the future. It is a hard time to govern, whether it be in Australia or anywhere in the world but we do not want to go down the path of other countries, and this is a tipping point for Australia. If we think that we are just going to get economic growth, and everything is going to be as it was in the early part of this century, it’s not, the world has changed.

LEIGH SALES:

The Prime Minister admitted on this program last night that big changes are required. What do you think those big changes are?

TREASURER:

We have to make our health system sustainable because…

LEIGH SALES:

No, no, he meant big changes in the way that you are running government.

TREASURER:

I think we have got to be more consultative. There is no doubt about that. We hear the concerns. I think we have got to explain our decisions more to the Australian people, and through…

LEIGH SALES:

Do you not feel that you have been trying to explain them though?

TREASURER:

You know, maybe in that regard, we haven’t done enough. We all have to accept collective responsibility but…

LEIGH SALES:

What do you think you have done wrong though? Because you have to understand what you have done wrong in order to change.

TREASURER:

Sure. Well, the Intergenerational Report, which I will be releasing later this month, is going to be the beginning of a major conversation with the Australian people about how we address the challenges of the future.

LEIGH SALES:

So that is a test is it for your…

TREASURER:

No, it’s not. You could call it a test. I am getting on with the job, as the Prime Minister is, of governing the nation.

LEIGH SALES:

The Prime Minister told the Party Room today, ‘if we focus on the ALP, we can win the next election, if not, we would lose’. Is that not an Opposition mindset? Because if you were successfully implementing your own policy agenda, then the Labor Party would be irrelevant?

TREASURER:

There is a sense of frustration that there is no accountability with the Labor Party…

LEIGH SALES:

But they are in Opposition?

TREASURER:

No, they control the Senate. They control the Senate, and they are not only opposing everything we’re doing to fix the mess, they are opposing all the things that they previously promised.

LEIGH SALES:

They don’t actually control the Senate. There is other people in the Senate, as well.

TREASURER:

They actually do – they have the biggest bloc of votes in the Senate and they do control the Senate with the Greens and the independents.

LEIGH SALES:

Does it indicate though that mindset about this focus on Labor – that Tony Abbott has failed to make an effective transition from Opposition Leader to Prime Minister?

TREASURER:

No, if you look at what we have achieved over the last 16 months, it is extraordinary for the nation. I mean, we have…

LEIGH SALES:

But every time you say that, aren’t you saying to the public, you guys are getting it wrong cause we’ve been awesome?

TREASURER:

No, no, the public always get it right. I mean, they always get it right.

LEIGH SALES:

They think you haven’t though.

TREASURER:

They are the ultimate customers. I grew up in a small business and my dad always said, ‘the customer is always right’, and he was right.

LEIGH SALES:

They are not happy with the job you have been doing.

TREASURER:

Well, we have got to do more. You know, when Leigh, when it gets hard, you have to work harder and that’s the lesson I’ve learnt in life and that is the lesson that we need to take forward. 

LEIGH SALES:

What’s the case for Tony Abbott keeping you in Treasury rather than replacing you with somebody else given that the Budget has arguably been the biggest political problem for the Government?

TREASURER:

I am not a quitter. I am not quitter; I have never been a quitter, and I am not going to quit when it comes to the best interest of the nation…

LEIGH SALES:

But whether or not you’re not a quitter is irrelevant to whether you’re the best person to do the job.

TREASURER:

I am the best person to do the job and I am calling it as I see it. There is no easy solution. There is no silver bullet. There is no easy path here. Either we reduce our spending in order to live within our means or you have to increase taxes, which at the end of the day, costs people their jobs.

LEIGH SALES:

Do you concede that if things continue in the same direction, that you will not be Treasurer within a short period of time?

TREASURER:

No, no, because it is not about me, it is about the Australian people.

LEIGH SALES:

But your Party Room this week has indicated a great deal of dissatisfaction – as I mentioned – the economy and the Budget has been the key political problem for the Government. Does that not put you on shaky ground along with the Prime Minister?

TREASURER:

Well, you know Leigh, only commentators would suggest that 61-39 is a loss…

LEIGH SALES:

I am not saying it is a loss but 39 is a substantial number.

TREASURER:

It is not about us. It is about the Australian people. I care passionately, passionately, about my country, and we are doing what is hard, not popular sometimes, but we are doing what is right as well.

LEIGH SALES:

You have a Party Room with 39 people hostile to the Prime Minister, universally bad poll numbers putting you in election-losing position and a couple of popular leadership candidates in the wings. Taken together, do all of those things indicate that it’s a matter of when, rather than if, the Party Room moves against the Prime Minister and by association, you?

TREASURER:

The irony is, Leigh, that no one is saying, no one is saying that we are not taking the right approach to dealing with the mess that we have before us. What they are saying and talking about – the issue is about selling things and so on. We have to continue to live within our means – to aim to live within our means.

LEIGH SALES:

I think the backbench has been saying you’ve been going about it the wrong way. The suggestion is that you guys have been having a conversation that the nation is not having.

TREASURER:

I think we have got to embrace the nation over the next few weeks. You will see us reach directly to the nation and invite the nation to participate in the conversation that helps to rebuild an understanding of the challenges Australia faces.

LEIGH SALES:

Treasurer, thank you very much for your time tonight.

TREASURER:

Thanks very much Leigh, thank you.