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SUBJECTS: The Budget; paid parental leave; RBA rates cut; carbon tax; E&OE................................ Emma Alberici: To discuss the week in politics and economics, we are joined now from Adelaide by the Manager of Opposition Business, Christopher Pyne and in the studio here by the Assistant Treasurer, David Bradbury. Welcome gentlemen. Hon Christopher Pyne MP: Good evening Emma. Alberici: The Treasurer was painting a rosy picture of the economy today. But in reality the Reserve Bank's monetary statement does demonstrate some real concerns about where the growth in the economy is going to come from once the mining boom has peaked, David Bradbury? David Bradbury: I think we have been saying for a period of time now the economy is undergoing some structural change. A lot of that is being driven by the persistently high Australian dollar. We have seen a very unique set of circumstances in recent times where the dollar continues to be very high by international standards. At the same time we have been experiencing a decline in our terms of trade, that's the prices that we are able to sell our goods on to the international market for. So this has been presenting some challenges. The mining boom is not over. We have certainly seen prices come off but we continue to see some very big projects, the production boom will go on for a period of time and that is something that will continue to play an important part in our economy. But, of course, we have also been saying for a period of time it is important that we make the necessary investments it make sure that we are well positioned to take advantage of the opportunities and to ensure that the economy continues to grow beyond that. Alberici: Christopher Pyne, the Reserve Bank seems to think the mining boom will peak sometime in the next 12 months or thereabouts. What's the Coalition's strategy to boost the non-mining sector? Pyne: Well the Coalition strategy, Emma, is to try and repair the damage that Labor has done in the last six years. One of the reasons the economy is flat is because there is no confidence in the economy. One of the reasons there is no confidence in the economy is because business, whether it's the mining industry, the manufacturing industry or elsewhere, all they can see ahead of them are more taxes from the Government, more debt, more red tape and green tape tying up major projects, militant unionism running rampant, whether it's in Melbourne from the CFMEU or from the Australian Workers Union on mining sites in Western Australia. The problem the government has got, they would like to now blame the Australian dollar but they have overseen the changes that allow the union movement to become so powerful. They have introduced things like the mining tax, the carbon tax. They slowed Olympic Dam down in my own State of South Australia to the point the EIS took over three years. In that period if BHP had started, they wouldn't have been able to pull out. Labor wears the blame for the situation we are in and they can't try and now find a new scape goat. Alberici: David Bradbury I will pull you up on the fact the monastery statement from the Reserve Bank today didn't seem to blame the dollar virtually at all. Where the alarm bells seemed to be ringing for the Reserve Bank is in the possibility that what will drive the non-mining sector over the coming years is more household debt. Do you share that concern, that the consumption side of the equation going forward might be funded by more household debt at a time when Australia already holds the world record for household debt? Bradbury: I think it's a much more complex picture than that. I think if you lack at what the Reserve Bank said in their statement earlier in the week, you can see they were pointing to the impacts of the high and persistently high Australian dollar. Alberici: They don't attribute all the problems to that by any stretch? Bradbury: If you look at the statement earlier in the week, it certainly points strongly to that being a key driver of why the Reserve Bank cut the cash rate. You listen to what Christopher has to say and I would make this point. We are running an economy that today is 13 per cent larger than before the GFC. Not much matched by any other advanced economy. Contained inflation. Record low interest rates. When they were in office, they told you if you kept interest rates low, that was a sign you were managing the economy well. That little blue pamphlet that the Leader of the Opposition runs around with, it says we will end the reckless spending so we can get interest rates low. How much lower must interest rates go? Alberici: Interest rates, neither side has any bearing on interest rates. It's monetary policy. I might try to engage one of you in the actual question I'm asking. Christopher Pyne, for all the noise about Government debt, isn't the real problem household debt, that it is the highest in the world? Pyne: It is a very serious problem, Emma. What I'm seeing as a local member of Parliament in my own electorate of Sturt is of course people are finding it very difficult to pay their bills, to pay their credit cards. A lot of people are capitalising their interest repayments on their mortgages into more and higher mortgages because they just find it very difficult to make ends meet. They are also very concerned about job security. So household debt is a key problem and the Government pushing up the cost of living, whether it's through the carbon tax, whether it's through constant and increased spending, is adding to that household debt. The only way that the Labor Party will pay back their own $300 billion of gross debt is through higher taxes which will place more stress on families. This week Labor has abandoned increase in the Family Tax Benefit Part A and abandoned income tax cuts, increased the Medicare levy by half a per cent. That is out putting more pressure on household budgets which will add to household debt. Bradbury: I thought you supported the increase in the Medicare levy. Pyne: M We are talking about your economic mismanagement. The truth is if the Coalition stayed in power... Bradbury: If you want to talk about economic management, unemployment 5.5 per cent. We have created over 950,000 jobs in office. Tony Abbott says he has an aspiration to create a million jobs in five years. We've done that, we've delivered that. We are not talking about it, we have done it. In addition to that we continue to have a record pipeline of investment coming into this country. Emma you make the point... Alberici: Which is tapering off, the mining sector. Bradbury: You make the point about household debt. Can I make this point, with lower interest rates, that means for a family on a mortgage of $300,000 they are paying $5,500 yes. Alberici: The Reserve Bank calls it a key risk, that with interest rates falling, households will take on more debt. That is the concern of the Reserve Bank and that spending in other parts of the economy will be fuelled by more debt. Bradbury: To put this in perspective... Pyne: That's exactly the problem you have identified, Emma. The spending in the economy will be fuelled by more debt because households are finding more of their disposable income removed from them while the Government tries to increase taxes to cover their own expenditure. Bradbury: You can't have it both ways. You can't have it both ways. Alberici: We will let David Bradbury finish his point. Bradbury: You can't say interest rates are so dangerously low because the economy is in crisis. That is effectively what Joe Hockey said the other day. And then on the other hand say we have grave concerns about household debt being fuelled by low interest rates. Pyne: Emma, if I can make a point... Bradbury: Christopher if you just let me make the point. Pyne: You've seem to have made all the point so far. Bradbury: What we have seen over recent years, as interest rates have been cut, we have seen households doing a lot of heavy lifting in paying down their debt. That has been a positive thing. The flipside of that has been that they haven't been spending as much money in the economy. That certainly the evidence that, if you talk to the banks, that is the evidence that is coming through very strongly, that there has been a concerted effort to pay down some of that debt. Whilst household indebtedness continues to be a challenge into the future, we are coming from a base where households have done some heavy lifting in recent times and the country is in a much better position as a result of that. Alberici: Let's move on. Christopher Pyne I wanted to talk about... Pyne: Are you just going to monopolise this interview, I mean.... Alberici:.... I wanted to talk about the participation issue. It was another issue raised by the Reserve Bank in its monetary statement. The Coalition... PYNE: I think David should be rebutted actually. Alberici: Well we've talked a lot about that issue and I want to move onto another. Pyne: I didn't get an opportunity to rebut what he said. Alberici: You had, you had quite a bit of an opportunity and I want to move on... Pyne: Not really actually, he has talked for most of the interview so far actually. Alberici: I'm giving you the opportunity if you let me ask you the question. Part of the statement today from the Reserve Bank was on workforce participation, that they want to see that higher. Your signature policy is on the very generous paid parental leave scheme which many of your MPs think is economically irresponsible. What do you say to that? Pyne: Well Emma, I think firstly David's points need to be rebutted. He made the point that in fact we're living ... Bradbury: I understand why you don't want to talk about paid parental leave. Pyne:... Oh you having another go David, you want to keep going again do you? Cause you've had most of the interview so far. Alberici: Christopher Pyne if I can draw you to my question about... Pyne: Well, I think David Bradbury's points need to be rebutted, Emma. Because the point is if we are living in the days of wine and caring as he seems to identify and blaming the consumers now for high debt because apparently they have been trying to pay back their debt so it's their fault, why is the Government's budget in complete disarray. Alberici: Christopher Pyne, the Reserve Bank did not mention Government debt at all in its monetary statement, which is why I raised the issue of household debt. Which the Reserve Bank identified as a key... Pyne: But David Bradbury is talking about things that need to be rebutted... Alberici:: Can we move on now? Pyne: And you want to move on to another subject which is very typical of Lateline, Emma. The truth is... Bradbury: If he doesn't want to talk about their paid parental policy I will. Pyne: I'm happy to talk about that policy, I'm happy to talk about it... Alberici: Christopher Pyne I want to talk about the Reserve Bank's statement actually and the Reserve Bank did not mention Government debt. The Reserve Bank mentioned the key risk to the economy was household debt. Pyne: David Bradbury made some points which need to be rebutted Emma and unfortunately you are not allowing the other side of the equation to get their points across. And the point is if things are going as well as David Bradbury says where is the Government's budget in complete disarray when revenues are rising 7.7 per cent, why are they saying there is a black hole of $7.5 billion two weeks ago then $12 billion then $17.5 billion, so David Bradbury's points don't add up and that's the point I'm making. Alberici: Okay, you've made that point. And now I want to move on to the paid parental leave scheme. Your scheme which many of your own MPs say is economically irresponsible. Pyne: Next Tuesday is the budget. I would have thought the paid parental leave scheme of the Coalition and the industrial relations policy, while important, are not as important as next Tuesday's budget. But the paid parental leave scheme is fully funded by 1.5 per cent levy on the 3,200 biggest businesses. It represents a tax cut for small and medium size businesses who'll have their paid parental leave paid. It is a workplace entitlement, not a welfare entitlement and that's the key difference between us and Labor. Labor wants to pay 61 per cent of working women who are earning more than the average wage, it wants to short change them when, if they choose to have a child. Now the Coalition says they shouldn't be short changed. The Coalition says they should have a workplace entitlement and that should be their salary for 26 weeks of the year. It is a similar scheme to that which operates across most of the western world. In fact in Europe, most European countries have 12 months paid parental leave at 80 per cent of their salary. Labor's is the least generous in the world and it's a welfare entitlement. The Coalition says we should treat women with dignity and respect and pay them what they deserve. Alberici:: Actually two in the top 10, Christopher Pyne, Sweden and I think - I can't remember which one the other one is, but there are two in the top 10 in terms of workforce participation among women who don't pay their mothers anything. Pyne: That might well be so. But the vast majority of the countries in Europe pay 80 per cent of a person's salary for 12 months. Bradbury: This is the interesting point. Christopher is making comparisons with Europe. We seem to have forgotten Joe Hockey's visit to Europe when he said we will end the age of entitlement. Go back and have a look at the press release when Tony Abbott first announced this paid parental leave policy. He compares it to policies in countries like Greece, like Portugal, like Spain. Now this is an unaffordable policy but an unfair policy. That's the point that Alex Hawke was making. I don't agree with him on many things. But he made the point, it's unfair. Alberici: Alex Hawke the Liberal MP? Bradbury: Why on earth should we have a paid parental leave scheme in place that regardless of what income you are earning, someone on $1 million, as an example, would get a $75,000 payment through the period of their parental leave. And then... Alberici: But as Christopher Pyne said, it's not a welfare entitlement, it's a workforce entitlement. Bradbury: If it's not a welfare entitlement and it's a workforce entitlement, why not fund it the way other workforce entitlements. This is the hypocrisy of this position. Alberici: Because small businesses can't afford it in the same way big businesses might. BRADBURY: Well okay, I've got a good idea then, let's fund long service leave, let's fund other leave entitlements by whacking a big tax on business. Pyne: We are not proposing that. That might be what you might propose to do but we're not doing that. Bradbury: But the point here is a $5 billion tax on business. Christopher Pyne, he told a couple of porkies there. He said one - it's fully funded with a 1.5 per cent levy on 3,500 businesses, 1.5 per cent on 3,000 businesses will not raise the revenue that is needed in order to fund this scheme. Alberici: How much will it cost? Bradbury: Well it will cost more than that. Alberici: How much more? Bradbury: If you look at the Australia Institute's report you will see and it depends of course. Pyne: The Australia Institute is a Labor Party organisation. Bradbury: It is not. It is not. Pyne: Of course it is, it's run by... read any of their papers, they are all left of centre. Alberici: I have to say, Christopher Pyne, the Institute of Public Affairs on your side of politics says it's unnecessary and unjustified, the paid parental leave. Pyne: Emma we are happy to take our policy to the people of Australia at the election and ask them if they think it's right that women have a workplace entitlement to be paid for 26 weeks of the year at their current salary so they can leave the workforce, have a child, raise that child for six months and if they wish to, return to the workforce. We think that is fair and reasonable. It's good for families, good for women, it's good for business. Bradbury: How much does it cost, Christopher? Pyne: You haven't got any credibility when it comes to the economy David, no credibility at all. Bradbury: How much does it cost? You don't know, do you? You don't know how much it costs. Pyne: Last year you said the carbon tax will be $29 a tonne. It's down to $4 a tonne in Europe. Your budget is in tatters. Your budget is in tatters David so you've got no credibility. So I can understand why you are shouting over people but you really need to let other people have a go. Bradbury: Just tell us what it costs? Alberici: We are running out of time. Just very quickly, gentlemen, David Bradbury, a final observation as we go into the budget. What is your message to the electorate, to voters? Bradbury: Well these are challenging times we are trying to chart through and we have had some difficult challenges with the revenue write-downs but we are determined to try and chart a pathway back to a balanced budget. Alberici: Is all the bad news out? Bradbury: Well, look, there are still many important announcements to be made in the Budget. In terms of whether they are bad news or not, we have said we need to take the necessary actions in order to compensate for the revenue write-downs and deliver the big reforms that we want to deliver. That's the NDIS, it's about delivering investments in education, and continuing to make sure that we can move towards a balanced budget. Alberici: Christopher Pyne? Pyne: Emma, basically you couldn't believe what the Government said to you in last year's budget so why would you believe what they say to you next Tuesday. Last year they said people would get an increase in family tax benefit A, ripped away. They said they would get a tax cut. Ripped away. They said they would never increase the Medicare levy. They have increased the Medicare levy. They have said there won't be a surplus budget, they said it on 500 occasions, there won't be a surplus budget, there are deficits as far as the eye can see. More Labor taxes, more debt means more taxes. Bradbury: You said you wanted to deliver surplus through the GFC. Alberici: You have had your turn, David Bradbury. Pyne: What David Bradbury needs to say will all the money that they are promising for education be in next Tuesday's budget or will it just be the New South Wales money. Because if all the rest of the money isn't in the budget, what they are really saying is they know they won't get a national agreement on a new school funding model and he hasn't even tried to answer that question tonight. Bradbury: Do you want to say a quick word on that? Bradbury:: You will have to wait until Tuesday night like everybody else Christopher. Pyne: If it's not in the budget, we will know. Alberici: Thank you both so much for coming in tonight. Bradbury: Thanks, Emma. Pyne: Pleasure. ENDS.