Bloomberg Daybreak: Asia

10 May 2017




SUBJECT/S: Budget comparisons to Labor; banks levy; AAA credit rating; Turnbull Government’s questionable Budget forecasts; Turnbull Government’s debt and deficit blowouts


YVONNE MAN: Let's go back to Australia now. The Opposition has labelled parts of the Turnbull Government Budget as unfair. Let's cross over to Canberra right now and go back to Bloomberg's Paul Allen standing by. Paul, it's very interesting. Some are calling this a Budget that could have been delivered by Labor, so what don't they like about it?


PAUL ALLEN: Let's ask the man himself. I'm joined here on the lawn outside Parliament House by Jim Chalmers, the Shadow Finance Minister for the Labor Party and I must say Jim, when I first looked at this Budget last night I thought this looks like an election Budget. One of my colleagues said exactly that. This looks like a Labor Budget. How are you going to oppose this?


JIM CHALMERS, SHADOW MINISTER FOR FINANCE: There's no doubt that that was the Government's political objective, to make it look like a Labor Budget because we have been leading the policy debate for some years now here in Australia. But there are important differences in this Budget. It's not a Labor Budget by any stretch. We wouldn't have given the $50 billion company tax cut; we wouldn't have taken the deficit levy off the highest income earners; we wouldn't have cut schools and universities and TAFEs, because that hollows out the future of the country. So there are still important differences between us on the Labor side and the Government when it comes to the Budget.


ALLEN: But perhaps one of the things you might have done though was that bank levy and I mentioned a minute ago that was lifted from a Greens policy I believe. And I asked the Treasurer Scott Morrison about this last night, whether he thought this levy's just going to be passed on to consumers. Let's just have a quick listen to what the Treasurer said.


SCOTT MORRISON FILE FOOTAGE: Well, banks need to explain what they do to their customers and their customers can go elsewhere. Smaller banks, regional banks are unaffected by this change and the ACCC – our market and competition regulator – will be keeping a close eye on the banks to ensure they don’t misrepresent any changes in charging or fees or things like that in relation to this matter.


ALLEN: Well Mr Chalmers, a couple of questions here. Is that a policy you can get behind and do you think the banks will just pass that on to consumers?


CHALMERS: We don't intend to oppose the bank levy that was announced last night, largely because the Australian Budget has got record net debt for the next three years, it's got record gross debt about to crash through half-a-trillion dollars for the first time in Australian history. There are severe fiscal constraints that we're dealing with, so we don't intend to oppose the bank levy. The onus is on the Government to guarantee to the Australian people that it won't be passed on in higher fees. The clip that you just played from the Treasurer, Scott Morrison, talked about the competition watchdog having the ability to police these sorts of things. What people need to understand is that ACCC funding has only been extended for one year. So they expect the competition watchdog to do their job for them and guarantee these fees aren't passed on, but they haven't adequately funded that watchdog.

BETTY LIU: Jim, I'm curious overall though on this Budget though, do you give any credit to it to perhaps furthering the easing of these fears or concerns that this AAA rating in Australia could be jeopardised? Do you think it makes any strides towards that?


CHALMERS: It was a substantial concern of ours that the AAA credit rating, which was so coveted and so important to our economy and won by the last Labor Government by all three of the major ratings agencies for the first time in Australia's history, it did concern us greatly that the big debt and deficit blowouts under this Government did put that AAA credit rating at risk. We'll let the agencies speak for themselves and no doubt they will make their views known. There are $21 billion worth of tax hikes in this Budget, which may be a factor in their considerations. But we don't think it should have gotten to this. It wouldn't have gotten to this were it not for substantial increases in debt and deficit in this country.


MAN: Shadow Minister, there's always been talk about these growth targets already. I mean, the Budget projects six per cent revenue growth in the next four years. The wage growth seems to be the big issue here at three-and-three quarters of a per cent. Some are saying this is overly ambitious given that unemployment really hasn't fallen that much. Do you think if we don't hit these targets, Australian could be at risk of not returning to a surplus by 2020/21?


CHALMERS: There are certainly risks that they've got the forecasts wrong again. They've been consistently wrong on wages growth for example; we have record low wages growth in this country. And so a lot of people are focused on that wages growth number in the Budget last night as an indication of the sorts of things that you're asking about. But it's also important to understand that the Government said that this would be a Budget about jobs and growth, but they've actually downgraded all of the key measures - whether it's GDP growth, wages, the unemployment rate is expected to be higher. And in their own Budget papers, there's a forecast of an almost extra 100,000 unemployed people compared to the last Budget. So the rhetoric has not matched up with the reality and has not matched up with the forecasts in the Budget.


ALLEN: Shadow Minister, I just wanted to ask you a political question. Four years ago, we were hearing from Joe Hockey that the country had a "debt and deficit disaster"; that it didn't have a revenue problem, it had a spending problem; no talk of debt and deficit disasters any more. Revenue raising is up. What do you make of this?


CHALMERS: Of course, when gross debt was about $300 billion in this country, the Liberal Party said that was a disaster – as you say. And they said that it was an "inconceivable amount of debt" and now we have in last night's Budget something like $725 billion in gross debt projected. The Treasurer has had to lift the debt cap in this country from $500 billion to $600 billion for the first time in our history. So that's for them to explain why it was such a disaster before and why it isn't now. But the real point is, those $21 billion in tax hikes in last night's Budget would not have been necessary were it not for four years of missteps and miscalculations and division and dysfunction and incompetence.  And Australians are really being asked to pay the price for that in last night's Budget.


ALLEN: Alright, Jim Chalmers the Shadow Finance Minister for the Opposition Labor Party, thank you very much for joining us this morning.


CHALMERS: Thank you.


ALLEN: Back to you, Betty.