12 February 2015
Transcript - #2015020, 2015

Interview with David Speers, Rowan Dean, Sean Kelly and Tony Bourke on Sky News, ‘The Nation’, Canberra

SUBJECTS: Unemployment, Budget, fuel indexation, GST, leadership, small business, submarines

DAVID SPEERS:

Good evening, welcome to the program. What a week it has been. It began with Tony Abbott surviving what he called a near death experience. 39 of his colleagues, more than a third of the party, wanted him gone. Now we’re told everything’s ok, the Prime Minister’s agreed to change, and unity prevails. 

The reality though is the Prime Minister is on notice. Desperately trying to turn around the government’s fortunes in an incredibly difficult environment. There are pressures mounting on the budget with unemployment rising this week, iron ore prices continue to fall, there is some confusion over where to now on outstanding budget measures and where to now on sub marines as well.

Labor this week seems content to sit back and enjoy the show.  It’s yet to produce much in the way of alternative policies on the budget, but that pressure will mount.

Joining us tonight to look at all of this, the Small Business Minister Bruce Billson. Rowan Dean is the editor of The Spectator magazine. Sean Kelly a former adviser to Prime Ministers Kevin Rudd and Julia Gillard. Also a columnist with the Sydney Morning Herald. And the Shadow Finance Minister Tony Burke. Welcome to you all.

I want to jump straight in on what is going on in the economy at the moment. We saw today unemployment went up, more than expected. It was an extraordinary and disappointing result the Treasurer said. 6.4%.

Bruce Billson why do you think that is? Why is unemployment rising?

UNEMPLOYMENT

MINISTER BILLSON:

We need faster rates of growth. We know the current growth rate is inadequate to absorb new entrants into the labour market. It is below historical trends. We need to get on with it and that is why our Economic Action Strategy is so important. Set and forget on the economy is not going to see the jobs created that we need.

DAVID SPEERS:

But after 18 months of a Coalition Government, why isn’t growth, what is going wrong?

MINISTER BILLSON:

Let us have a look at that period. In calendar year 2014 you had 213,000 new jobs created by the economy. That is three times the rate of the last year under Labor.

But we cannot rest on that performance.

We need to lift the game of not only the settings within the environment that encourage investment and employment, but get that jobs growth rate up, and also deal with the almost 40% of the unemployed that are young people wanting to get a start in their careers, a livelihood that they can look forward to.

DAVID SPEERS:

How do you do that? It is easier said than done.

MINISTER BILLSON:

It is a range of things. We have got a strong belief that small business and family enterprises are the engine room of the economy. We lost 519,000 jobs in that sector under the Rudd/Gillard/Rudd Government.

We need to recover those jobs.

We need to put incentive there for small business.

We need to create the entrepreneurial eco-system to encourage investment. We need to get costs out of the economy. That is what the Carbon Tax was about.

DAVID SPEERS:

I might come back to some of those areas. Tony Burke why do you think unemployment is rising at the moment?

TONY BURKE:

You need throughout all of this to distinguish between the issues that a government cannot be in control of and the issues they can be in control of. Commodity prices, international prices for example – they are not in control of, and that has impacts on revenue, it has impacts that ricochet through the economy.

There are issues that they are in control of and the classic one has been – you do not help local businesses if you wack consumer confidence by attacking household budgets. You don’t.

Small businesses rely on people having disposable income and if we have a budget that tells people that they are going to have a massive hit to their household budget, you have a hit to consumer confidence and you have a hit to business confidence.

DAVID SPEERS:

But so does the fall in commodity prices and the share, but all of that affects consumer confidence.

TONY BURKE:

And that is why I say you need to distinguish… and it is ridiculous to pretend that commodity prices do not have an impact, but we need to be honest about the fact that confidence and what has happened with the Budget process has had an impact as well. And you look at the charts on confidence and the wack happens the moment they started the Budget leaks.

ECONOMY/ BUDGET

DAVID SPEERS:

Rowan how would you assess what is going on in the economy?

ROWAN DEAN:

I am fascinated by Tony’s emphasis on consumer confidence – the reality is that six years of Rudd and Gillard completely buggered up our economy and someone needs to fix it. Either you guys need to fix it or you guys need to fix it. Or you need to work together to fix it.

But the consumers are not confident because you guys are not fixing the problem. You lot caused it predominantly. You lot have got to fix it and if you cannot do it by yourselves you have got to do it together.

And Tony, the Australian people are fed up with Labor blocking every single thing. Every Budget measure, even Budget measures that you yourself proposed. That is called hypocrisy.  The Australian people do not like it. That is why they are not confident. They want to see this Budget fixed.

DAVID SPEERS:

But do you accept the point that those Budget measures, and many of them have been blocked by Labor and the others, that is what hit consumer confidence to a degree?

ROWAN DEAN:

Certainly because what the public are seeing, what business is seeing is the political system frozen. It is atrophy.

DAVID SPEERS:

But what about the measures themselves?

ROWAN DEAN:

Because the measures, there is a raft of measures, some were popular, some were not but the reality is you guys should be doing what John Howard was good enough to do during the great reforms of Keating and Hawke – they supported them. The Liberal party supported those reforms which is why they worked.

Now if you were serious about the problems facing the country and serious about wanting to see people get back to work, you would be saying to your leader – come on Bill, we have got to work together in the way that John Howard worked, we have got to show that we care about the economy, we care about jobs, we are going to be part of the solution not continuing to be the problem.

DAVID SPEERS:

Let me bring you in Sean. Let me get your assessment of why.

SEAN KELLY:

Sure. The things that Rowan is talking about Labor blocking, are not these huge great reforms, they are actually the things that are taking money out of people’s pockets and this is the problem.

Yes confidence, exactly what Tony said, but more than confidence you are actually talking about money being taken directly out of families’ pockets and what that does when you are hitting people on the lowest socio-economic brackets, it is those people who are most likely to spend money. Instead where you could make cuts, are cuts like, for example closing the loopholes that give tax breaks to people who already have superannuation earnings of over $2 million.

That is not going to hit the economy, it is not going to hit consumer confidence – those are the changes that Bruce and his colleagues have chosen not to make.

MINISTER BILLSON:

I do not want to disrupt the chat but I am fearful of throwing some facts in.

Business confidence on average under the Abbott Government is higher than under the Rudd/Gillard/Rudd Government.

SEAN KELLY:

So we are going through the GFC in that period. That is a ridiculous comparison.

MINISTER BILLSON:

There was an 8% lift in consumer confidence. No report.

There is an appetite that whenever there is some negative news, Labor celebrating a year of obstruction, just love getting on any negative news.

Let us look at the green shoots. Housing industry – encouragement there. Retail – some encouragement there. Job ads have gone up for each of the last eight months. Dun and Bradstreet expectation of employment intentions for employers – the highest it has been in a decade.

Now we can talk ourselves into a self-fulfilling prophecy…

DAVID SPEERS:

Why has the Reserve Bank cut interest rates to a new record low? Why are unemployment rates creeping up?

MINISTER BILLSON:

We need to lift the growth rate. As I said at the beginning at the risk of repeating myself, we need to lift the growth rate.

TONY BURKE:

I know you want to move on. But confidence now is the lowest it has been for 20 years with the exception of the Global Financial Crisis.

MINISTER BILLSON:

Which is not right but I am happy to share the figures and you can ask me about it next time we are in Parliament. There you go.

DAVID SPEERS:

Alright we will check the figures. I know there are a number of surveys.

MINISTER BILLSON:

It is simply not correct. Your Shadow Treasurer says those things and you think he must be looking at some confidence of Labor branch members. I am not sure what he is looking at.

When you look at the data and you look at the long-term trends, you look at what has been happening.

Ups and downs no question about that and your point is right – dislocation and objection in the Parliament does have an impact on consumer confidence.

ROWAN DEAN:

And how can consumers be confident when we are borrowing $1 billion every month? Wasting it on interest. That is like a mortgage of $1 billion. How can people be confident about that? That is the legacy of the six years of Labor.

SEAN KELLY:

Rowan that is facile. You have a better understanding of economics than that.  You know that the Global Financial Crisis occurred.

ROWAN DEAN:

It is less facile than referring to the GFC at the drop of a hat.

SEAN KELLY:

Are you going to ignore the Global Financial Crisis?

ROWAN DEAN:

Yes which lasted what, a few months at the most? The rest of the world managed…

SEAN KELLY:

Rowan, you are making yourself look silly.

ROWAN DEAN:

No I am sorry you cannot constantly go back to the GFC impact.

You were stimulating the economy, yes that was good. The first bit of stimulation – terrific. You then went on and on and on. You turned the taps on full and you did not turn them off.

DAVID SPEERS:

Let us fast forward to what is happening today. We do need to get the Budget back into some form of balance. I think everybody agrees. It is the way to do that which creates the argument.

Last year’s Budget measures – we still have a number of them…

MINISTER BILLSON:

Still work to do.  Some good news today though.

DAVID SPEERS:

What is your position can I ask Minister on whether to proceed with the GP co-payment, higher education reform, pension indexation changes and also the dole?

MINISTER BILLSON:

There is a range of measures that are there which have not passed the Parliament. If they are not going to pass the Parliament, we need to develop some better measures. But we need a Parliament that faces up to the realities.

DAVID SPEERS:

So when do you make that call though?

MINISTER BILLSON:

..And faces up to the reality that doing nothing is no option. We are spending $100 million today as a government more than we bring in in revenue. Now we are creating intergenerational theft for our kids. Change is required in the health sector – accessibility and affordability.

DAVID SPEERS:

So what do you do with these measures? Do you put them to a vote and then drop them or what do you do?

MINISTER BILLSON:

If there is no prospect of a Senate embracing the program there is little point banging our head against the wall. So we need to re-engage, redevelop, look at new alternatives because doing nothing is no option.

DAVID SPEERS:

Joe Hockey this week has told you and your colleagues that unless you do implement those unimplemented measures there is no path back to surplus.

MINISTER BILLSON:

And that is why if they are not going to get through the Senate, we need to consult, we need to engage, we need to appeal to the Senate particularly and Labor that has put us on this trajectory.

Today, a $1.1 billion budget saving was achieved. You know how? By reducing the rate of R&D tax concessions when people have already spent over $100 million. Very similar to the measure Labor proposed. You know what Labor did? They voted against it. A $1.1 billion gift. That is just bizarre.

DAVID SPEERS:

Big business, this limits them to $100 million…

MINISTER BILLSON:

Over $100 million it is only a 30% treatment, not 40%- and Labor thought there was something appalling about that.

DAVID SPEERS:

Why?

TONY BURKE:

We announced that measure as part of the Gonski package. When you said you were not going to send the Gonski money, our support for that was no longer justified. So we did not support it anymore.

It was a revenue measure to pay for an education reform that the Government then dumped.

DAVID SPEERS:

But surely you would acknowledge Tony Burke there is an equally important task and that is repairing the Budget. Yes Gonski is important. Repairing the Budget is important too. It was good enough to use this money for one thing, why not use it for the other?

TONY BURKE:

No you need to acknowledge what needs to be done with respect to the Budget. All the talk about budget emergency, by the time we got to the Budget, Joe Hockey started tapering that language back and saying no what we have is more of a long-term problem rather than an immediate problem.

DAVID SPEERS:

Forget what Joe Hockey said, look at the Budget bottom line.

MINISTER BILLSON:

Your measure that you took to the election. Worse still, you announced it, banked the savings in the Budget and then turn around and vote against it to give what was $1.4 billion to the 25 largest…

TONY BURKE:

I will answer it a third time but the answer is not going to change.

MINISTER BILLSON:

But the answer is not answer. It was an excuse for inactivity.

TONY BURKE:

It was to pay for an education reform. You had a package that was: we will be able to deliver this reform; here are our revenue measures to do it. All of that went together. You cannot just unpick it and say well we are going to expect Labor to agree with all the revenue raising but we are not going to spend any of the money. We are going to rip $80 billion out of schools.

MINISTER BILLSON:

You have locked in more than 4.5% of real growth in the Budget. You have vandalised the Budget. You had no revenue to support it. You have wrecked the economy in relation to this debt burden and now you sit back like you have got no culpability, no responsibility.

When are you going to step up and play a role in what the nation knows is needed?

TONY BURKE:

More than $20 billion of savings have gone through with our support and you know that.

But what you also know is the fact that before the election, you claimed to be fully in support of Gonski. If you vote Liberal or Labor you will get the same amount of money for your schools.

MINISTER BILLSON:

And we funded those Gonski years that were in the forward estimates. Exactly as we said.

DAVID SPEERS:

Should Labor have backed measures that it proposed before the election?

SEAN KELLY:

I completely agree with what Tony said. You have to look at what things are tied to. The Liberal Party has done the exact opposite in a much more irresponsible way with relation to carbon pricing. They kept every one of those expenditures in terms of tax cuts and yet failed to put a carbon price which would have raised that revenue from businesses. A several billion dollar gift from businesses to use Bruce’s words.

MINISTER BILLSON:

So cost of living now does not matter? Cost of living did matter a minute ago, now it does not matter when you take the carbon tax off but leave the compensation there.

SEAN KELLY:

Specific measures are tied to specific expenditures and that is a legitimate tool of government.

FUEL EXCISE

DAVID SPEERS:

Let me throw another one on the table. The fuel excise indexation – you have done that through regulation. Now I think the saving from that is $2.1 billion. It will have to go to a vote before the end of the year. What is Labor’s thinking on that now?

TONY BURKE:

We have continued to oppose that measure.

DAVID SPEERS:

So you will want to end indexation again?

TONY BURKE:

This is on the fuel indexation?

DAVID SPEERS:

Yes.

TONY BURKE:

Well it is not ended again. We are keeping it as it has been since the Howard Government changed the indexation.

DAVID SPEERS:

But under regulation it has been re-introduced.

MINISTER BILLSON:

To where it was under the Hawke years.

TONY BURKE:

In terms of legislation, our position has not changed.

DAVID SPEERS:

So you will move to disallow it?

TONY BURKE:

I am not going to go through parliamentary tactics or anything like that.

DAVID SPEERS:

I just want to establish whether you will seek to overturn what they have done?

TONY BURKE:

Our position is that the arrangements that were put in place by the Howard Government on that should not have been changed straight after the election by this government.

DAVID SPEERS:

And now they have been, what do you do?

TONY BURKE:

We are opposed to what they have done. When it has come before us in the Parliament we voted against it.

DAVID SPEERS:

But now the ball is in your court.

TONY BURKE:

I know but I am not going to go further than I have gone David.

DAVID SPEERS:

Why not?

TONY BURKE:

I have told you our position has not changed. There are specifics in terms of how you deal with the parliamentary tactics on it and when you move…

DAVID SPEERS:

I know it is a tactical thing but it does leave open the option you will agree to keep indexation in place.

TONY BURKE:

Our position has not changed. I am not going further than that.

DAVID SPEERS:

Sean what do you think on that one?

SEAN KELLY:

David I have been on the record on this show before saying that John Howard should not have changed it in the first place, so I am at odds with Labor on this. But that is as a free standing policy and I do think you have to look at it in the context of the Budget and the problem with the petrol excise change in the Budget was that it came amid a whole set of measures that targeted families, that hurt families. Whereas people on much, much, much better incomes were left off the hook or were put on the hook very, very temporarily and that is why the Budget as a whole was flawed.

So this measure by itself – it is good policy. But a Government always has to make a measure in context and unfortunately I do not think this measure fits the overall Budget.

MINISTER BILLSON:

Thank goodness we passed the Carbon Tax Repeal.

SUPERANNUATION

DAVID SPEERS:

Let me go back to something Sean raised earlier and that was superannuation. The tax rate at 15% is a lot lower than many people pay in their personal income tax rate. If you did tax your super contribution at the same rate as your income tax rate, you would raise around $12 billion. That would go a long way towards Budget repair. A good idea?

MINISTER BILLSON:

The issue there is what will it do to the retirement savings pools of individuals if you are looking to build that up at a time when now we have about five people in the workforce for every one retiree. By middle of this century, not very far away, it is 2.7.

The capacity of the retirees to support their own living standards in retirement is a worthwhile ambition, a goal that has been a bipartisan objective. That is why there are those concessional treatments.

DAVID SPEERS:

Are they too concessional do you think?

MINISTER BILLSON:

I do not have a view on that because they have been in place and we have said we are going to leave those. We will leave those. If people want to raise the argument through the tax whitepaper and argue it is not achieving its policy objectives well make those arguments.

DAVID SPEERS:

There is some big bucks to be made if you did shift some of the tax rate.

ROWAN DEAN:

Sure there is but if you start doing that you tinker. Going back to what you actually asked Tony and Sean to come up with, was ideas to how we could save money. We got a language lesson. We got a bit of stuff about the carbon tax, now apparently an economic measure rather than solving climate change.

SEAN KELLY:

And super.

ROWAN DEAN:

Where we have to cut is welfare, health, education – that is where we need to cut. Why? Because they are the biggest expenses that the Government has and it cannot afford them at this point in time. If I am running a small business, if I am running a household, if I am running a big business, if I am a CEO – I look at that and I go we have to cut here, here and here.

We have to do it sensibly, we have to do it carefully and we have to do it in consultation with, supposedly, the responsible opposition.

DAVID SPEERS:

This gets down to a language thing as well. Do you regard the superannuation tax concessions as an expenditure item or a revenue item? Whichever box you put it in, it is a lot of money that the tax payer is not collecting.

ROWAN DEAN:

Of course it is a lot of money and it was designed by Paul Keating and in fact partially by my father to help ensure that people come off the expense of the state, come off welfare from the state and have their own finances to look after themselves. It has been misused.

Sure, there are ways we could look at it to improve it but the point about superannuation – it has to be a long game. It cannot be a political football that is tossed around from one administration to the next, otherwise it completely defeats itself.

It has been misused but the purpose of having a lower tax rate so that people invest in, is absolutely sound, and that was the initial idea behind superannuation.

DAVID SPEERS:

Is this going to be on Labor’s radar Tony Burke?

TONY BURKE:

There are issues relating to high-income super and multi-national tax avoidance, that one of the first things the Government did after winning the election was to take them off the table which were revenue items that we said they should keep.

It was not identical to what you have described.

DAVID SPEERS:

No but it was a tax on earnings from super more than $1 million I think?

TONY BURKE:

Yes and the revenue was not of the proportions of what you have described there.

We are methodically working through our revenue measures now. What we will not do is do the sort of thought bubble of, we are being asked to produce something right now and without going through the full level of consultation and without going through the different modelling exercises and checking your difference presumptions that you want to do, just got out there with an announcement.

That was done by the Government when they were in opposition. It was the paid parental leave scheme and it hung around them like an albatross for years.

DAVID SPEERS:

To be fair though Bruce Billson, I do not recall 18 months or so out from the last election the then opposition having detailed tax policies.

MINISTER BILLSON:

You were having fun on paid parental leave as I recall.

DAVID SPEERS:

Yes but that was an expenditure item what I am saying is any sort of Budget repair item – I do not think we had one did we?

MINISTER BILLSON:

We were working to the numbers that were provided. That was our purpose, working to the numbers provided.

Tony, I will give him credit for that disclosure about not coming out with a though bubble because some of those measures that Tony was talking about, were some of the 92 announcements that were not enacted as tax changes because some of them were unactable.

It was like someone had dreamed it up in a ministerial office that if you move this thimble and this around and take this amount of retirement nest egg and this income will do something to you and when it came to actually implement them, Labor could not and did not.

I am pleased if they are thinking about this carefully. It is a serious issue and if they are doing that work well good luck to them because that was not what they did in government.

ROWAN DEAN:

18 months David, to answer your question. 18 months before the last election, Wayne Swan was still promising that we would be in surplus and the people of Australia believed him. And you did not deliver a surplus and then you went on to deliver not only $18 billion worth of debt, but $46 billion or whatever it turned out to be.

So the reason why the Liberals did not need to put their costings out there, there savings out there was because you promised us there would be savings and you did not deliver them. And now we are in the position where we know we are in debt and we have to get back to surplus.

Every government, including yours, has agreed that we should be in surplus. Every government, including yours.

TONY BURKE:

It is just bizarre if we are going to be in a world where revenue write downs exist when there is a Coalition government, but they are mythical and purely political when there is a Labor government and that is the core of the argument you just made.

ROWAN DEAN:

The surplus has been mythical ender every Labor government back to Paul Keating in 1989.

TONY BURKE:

If you are going to talk over me let us just move on.

GST/TAX WHITE PAPER

DAVID SPEERS:

Let me throw another idea on the table to raise around $4 billion. I do not want to get into the whole GST argument about should we or should we not increase it, but if you did apply it to private education, to your school fees in a private school - that would be $4 billion you could raise then. Why not do that?

MINISTER BILLSON:

Sounds like you should make a submission to the tax whitepaper. Now is the time. If people have got ideas now is the time to engage.

DAVID SPEERS:

I am asking you whether that is something that would be a good idea.

MINISTER BILLSON:

Put it into the tax whitepaper.

DAVID SPEERS

You are not opposed to it?

MINISTER BILLSON:

I am not going to react to a great idea you may have had on the way here. You might have been very pleased driving here thinking I have got this idea. I am not going to do that.

DAVID SPEERS:

I am just trying to put some ideas on the table that you guys are not. Rowan what do you think? So apparently $4 billion could be raised if you extended the GST to private school fees.

ROWAN DEAN:

Sure but if you start nit-picking like that you A) are falling into a kind of weird class warfare thing and we saw that under Wayne Swan, where private schools get this and public do not.

More importantly you have got to have a level playing field, so if you are going to broaden the GST absolutely but do it across everything. If you start trying to use the GST as took a bit here take a bit there.

DAVID SPEERS:

So put it on food and any other areas that are exempt as well?

ROWAN DEAN:

Of course. The GST works when it is simple and it works when it is even and when it is across the board. If you start trying to play with it as some kind of dashboard it would be a disaster.

DAVID SPEERS:

You extend it to food as well, you get another six or seven billion dollars so it starts to add up. I mean this is serious Budget Repair we’re talking about here. I know you’d have to…

MINISTER BILLSON:

There are two sides to the ledger though, there is the revenue and the expenditure side and we have been focussing on the proportion of GDP that the Government is spending and the proportion then committed to which is expenditure not funded and you look at a fairly heavy tax burden.

Now, the White Paper is about saying what is the tax system we need to raise the revenue we need for essential works and services and support our goals as a nation. I mean everyone goes off about payroll tax, a tax on jobs, when we’re trying to create jobs and people go well the States should get rid of that but they will need to be paid out for it.

Now and that is the discussion we have to have, what are those tax setting and calibrations that will support our national agenda, the goals we have as a country and raise the revenue we need, mindful that every dollar needs to be prudently spent, that’s the task.

TONY BURKE:

You change the GST to be able to get rid of payroll tax?

MINISTER BILLSON:

You are putting that forward as an idea? Now is the time for those ideas to come into the Tax White Paper.

TONY BURKE:

The answer, for me, in terms of the GST is that we don’t support a broadening of the base or an increase of the rate of the GST. In terms of Budget Repair, unless you were cutting some additional deal it wouldn’t make a difference to the Federal Budget bottom line because the GST revenue goes to the States.

DAVID SPEERS:

Ok, well why not? Because, I appreciate neither one of you, you’re politicians, you don’t want to say let’s extend the GST at all, but we’ve got a Budget problem here.

TONY BURKE:

Well the reason why not on that one is really clear. I don’t believe it’s a fair thing to do. Yes, it’s a blunt instrument, yes in terms if your only concern is government revenue it’s really easy, but in terms of where it hits people. The bigger proportion of your income you’re spending on domestic expenditure, the more tax, proportionately, you’re paying. That’s how it works and…

DAVID SPEERS:

But you could say that about so many spending areas whether it’s the GP co-payment or … there are plenty other changes if you’re really going to simplify it down to what’s the only fair thing you can do – it’s putting up personal income tax right?

ROWAN DEAN:

And if you’re reasonable, it’s not the answer, it’s not about raising revenue. It is about cutting the spending then raising the revenue. But if you try and raise revenue while leaving all this spending untouched all you do is take the economy further down.

SEAN KELLY:

That’s just not true. Any serious economist, every serious economist in the country right now is saying we cannot raise all of the money we need to raise for this Budget by spending cuts alone. Revenue in….

ROWAN DEAN:

That’s what I just said.

SEAN KELLY:

No, you did exactly what Bruce…

ROWAN DEAN:

That’s what I just said, Sean. You don’t just do revenue, I said you do the spending... so don’t verbal me.  Thank you very much.

SEAN KELLY:

You did exactly what Bruce did before which was to say the emphasis needs to be on spending cuts. We need to think about spending cuts first, sure.

I would absolutely say, as every economist says, that revenue needs to be the priority here and I will say, as I’ve said on this show before, you need to look at a very wide range of areas, probably including GST, not necessarily in a wholus bolus way because that is a regressive tax, for potentially, in targeted ways like the one that David just suggested.

Now the problem, it’s a very real problem but it’s a political problem that we have right now.

We have a Prime Minister who has just said he is only going to present a Budget full of fights, that he thinks he can win with the Senate, with a rag tag group of Senators who agree on barely anything. So I know we’ll get to leadership … but it’s very relevant …

DAVID SPEERS:

I just want to tell you the breaking news you’ll be seeing on your screen that Vladimir Putin has agreed to a cease fire in Eastern Ukraine to kick in from Saturday, from February 15. We’ll get more on that later tonight. We’ll be right back after the break.

LEADERSHIP

DAVID SPEERS:

Let’s turn to far more friendly ground, the leadership… so Bruce Billson, why do you think 39 of your colleagues voted to spill the leadership?

MINISTER BILLSON:

Well they were obviously making a statement of a need to adjust the way we are going about our business. A need for more collaboration, collegial engagement with our colleagues.

It perhaps may have been like with a marriage, sometimes you don’t hear your partner saying - look this is kind of annoying me, or I would  really like some change here with the busyness of life and the many things on the plate you don’t always hear that.

When someone makes a very big statement and it gets a little emotional and you certainly hear that. I think that was perhaps what we were seeing.

TONY BURKE:

So you weren’t trying to get a different leader?

MINISTER BILLSON:

No I certainly was not because I did not think we needed a different leader.  I think we need the best of everybody, we need to really knuckle down an important job of building a strong economy and lifting prosperity and building financial and national security. 

That needs the best of all us. 

So I thought the spill motion was a bit of an act of self-harm. We’re through that now; everyone’s rallying around getting on with the important work of governing well.

DAVID SPEERS:

And has anything changed?  Has Tony Abbott changed anything?

MINISTER BILLSON:

Yes a lot of the processes have changed in terms of the backbench committee Chairs, there is a regular engagement with the full Cabinet.  I know I work very closely with my colleagues because they have got small business and family enterprise interests that are very large in their priorities so...

DAVID SPEERS:

Were you doing that already because some of your colleagues weren’t?

MINISTER BILLSON:

Yes I was because I am that kind of guy. Well I don’t know what their process is but in terms of the full Cabinet, hearing from those important contributors in our Party, more formalised processes for doing that.

I think that is one of a number of good steps and I welcome those changes and they are already proving to quite worthwhile.

DAVID SPEERS:

So because backbench sub-committee chairs are going to talk more often to Cabinet Ministers, will that turn around the Government’s fortunes do you think?

MINISTER BILLSON:

We need the best of everybody and if there is ideas and contribution that will add to improving the prospects for our country, bring them on.

Even your ideas, David, we welcome input and we don’t prejudge from where they come from.

DAVID SPEERS:

If only I was a backbencher or committee Chair I might have the ear of the Minister.

MINISTER BILLSON:

But this is about all of us bringing our best game so we can do our best work and govern.

DAVID SPEERS:

So how will this work, I’m just generally interested, how this will work in the lead up to the Budget?  Right so, any idea what’s going to be announced on Budget Night will now have to be run through the backbench?

MINISTER BILLSON:

What we do in the ordinary course of events, and this is probably gripping for us insiders, but your viewers might find this spectacularly boring. 

Normally the engagement between the backbench and the Executive is one of collaboration and interaction.

DAVID SPEERS:

Did they know about the GP co-payment for example?

MINISTER BILLSON:

What we were finding was there was so much going on that often the backbench was being engaged too late in the process when they had useful contribution they could have made earlier in the process.

DAVID SPEERS:

It is too late in the process, as in, finding out when it’s announced on Budget Night?

MINISTER BILLSON:

Than would probably be characterised as too late, you are very perceptive and I admire that.

DAVID SPEERS:

So how do you do it this time?  I mean, take your portfolio for example, when you come up with your plan to cut small business tax rates even further, what will you do will you take that to the whole party room and say ‘we’re going to cut the tax rate to 28% for the small business community?

MINISTER BILLSON:

Well what we have already done and what we continue to do is have workshops with colleagues, we travel around the country we talk to small business men and women, any of whom have mortgaged…

DAVID SPEERS:

Can you tell me what your plan is?

MINISTER BILLSON:

We share our ideas and then they will share theirs and we can work them through and usually the net result is better for that interaction.

DAVID SPEERS:

So they’ll know about the specifics before they’re announced

MINISTER BILLSON:

That would be the ordinary course of events to happen David, the ordinary course of events. Again if you have something to contribute David don’t hold back, this is a patriotic enterprise all are involved here.

DAVID SPEERS:

I’m just asking on behalf of your aggrieved colleagues who wanted to chuck out the leader.

MINISTER BILLSON:

Is that what that was, I knew there was something that happened earlier in the week.

You know we have had changes to foreign investment arrangements; we have had really good announcements during the weeks, R & D tax…

DAVID SPEERS:

I want to get back to the small business tax rate because I’m keen to explore that but is that about it? Is that all the backbench were after do you think Rowan a better relationship between the chairs of the backbench committees.

ROWAN DEAN:

Of course not, the backbench were only after one thing and that’s better polling figures and most people are astonished that the Liberal Party polling figures have been so low over that Christmas period. I mean if you look back on last year, I won’t go into the whole list, but it is a very impressive list of achievements that Tony Abbott and the Government managed to pull off. But more importantly why…

DAVID SPEERS:

But that was even before good governance

ROWAN DEAN:

So imagine now, with good Government, how many more achievements there are ahead. But the point is this is an achieving Government. Now the problem is the Budget, we’ve talked about that earlier, the blockage by the Labor Party and the Independents is the problem and that’s causing the low polling figures. So that’s it, no the measures aren’t the problem because if it’s not those cuts it’ll be other cuts as we all know.

We’ll call them whatever you want. So what’s going to happen over the rest of the year? I believe that was a kind of a low point and they’re going to come back, Tony Abbott is a fighter, he’s always been underestimated, particularly by the Labor Party. He fights best when his back’s to the wall. He is passionate about repairing the Budget, getting the economy sound, that’s what the Liberals need to do, that’s what the Coalition needs to do one way or the other.

It’s going to be a tough Budget but the key thing that happened out of this spill which the Australian people now know and the Liberal people know they are not the Labor Party.  They do not stab their own in the back.  They had the discussion, it was a spat, they looked into the abyss and they went ‘we go that way, we are no better than the Labor Party, we are no more principled than the Labor Party’, they stepped back on it.

DAVID SPEERS:

So when you look at that year and your confidence there that that was the low point by the middle of the year you’re confident Tony Abbott will be there and will be ahead in the polls?

ROWAN DEAN:

He’ll be leading the Party at the next election.

DAVID SPEERS:

He will be ahead in the polls by the middle of the year do you think?

ROWAN DEAN:

That depends on the Budget, now and again we go around and around in circles and this is why your idea, David, of getting some kind of agreement between the political parties on how to fix the Budget.  They don’t want to do it because they would rather trash and burn and vandalise the economy purely for political reasons. Their choice.

DAVID SPEERS:

Just coming back to what the real message has been from the backbench, Sean, I’m keen to hear your thoughts on this having witnessed very personally and up close the demise of two Prime Ministers, Kevin Rudd and then Julia Gillard. Watching from the outside what’s going on in relation to Tony Abbott, what do you make of it?

SEAN KELLY:

I almost felt pity for Tony Abbott this week. Almost.

Once you enter a leadership death spiral it is almost impossible to snap out of – and the reason for that is very simple, it’s because everything after that point becomes ‘seen through the prism of leadership’ and that’s the problem for Tony Abbott’s Budget.

Now, Rowan’s right, this is about polling to a very very great degree. Polling isn’t caused by simply superficial measures; it is caused by a number of decisions in the Budget which were terrible. If it is in fact caused by Labor blocking things, which I completely dispute, then I’d say the backbenchers probably understand the lesson that John Howard understood. Which was that a Prime Minister is ultimately held responsible for what he does, not just what he says but what he does, and John Howard understood that he had to do a deal to get the GST through and he got it through and he understood that he had to deal with Brian Harradine against his best wishes to get Telstra through and he did both of those things.

Now Tony Abbot, unlike John Howard, unlike Julia Gillard, has failed repeatedly to get pieces of legislation through. He came out with a terrible Budget, which was routinely panned, universally attacked which has destroyed his Government in polling terms and destroyed his own personal approval ratings and at the same time he has completely failed to deliver the legislation that he promised to get through the Government.

He is not governing, and that is ultimately the problem and his backbench have looked at him and they’ve delivered a verdict which was that he doesn’t have what it takes to be Prime Minister. Now, I thought, before he became Prime Minister that Labor had a dress made of him and I said to a lot of people, don’t underestimate him again, we made that mistake once.

Right now I feel like a fool for saying that because I agree with those 39 members of the backbench, he doesn’t have what it takes.

DAVID SPEERS:

Tony Burke, just before we leave this leadership issue, let me ask you honestly is Labor hoping that Tony Abbott stays? Do you have a preference?

TONY BURKE:

I think the reality is the undermining will continue and he’ll go, but it’s not like we’re relevant to it.

But, there’s been a presumption that we’re all watching this and enjoying it in that sense – can I just say there’s a theory that gets batted around that your best day in opposition is still not as good as your worst day in Government. 

Your worst day in politics no matter which side of the chamber you’re on, is when your own side is tearing itself apart, and that’s what’s happening in the Liberal Party at the moment.

Bruce has given a heroic way of describing it, but they are genuinely tough times and people who have worked together for years make different judgement calls. A whole lot of people were bound in that ballot because they are on the Executive. Of the people who weren’t bound, two thirds of them voted for a spill. That sort of momentum... it will be extraordinary and unprecedented if what you’re describing happens.

DAVID SPEERS:

Stay with us, we’ll be right back.

SMALL BUSINESS

DAVID SPEERS:

Now Bruce Billson, I promised we would come back to small business, your portfolio.

MINISTER BILLSON:

At last, you have realised that almost half of all the private sector jobs are in small business and family enterprise.

DAVID SPEERS:

Last time I heard that was from you.

MINISTER BILLSON:

See I try to get you more interested. We need to focus on this.

DAVID SPEERS:

We do. Now what I want to focus on is the carrot you are dangling in terms of a further tax cut. They’re getting a one and a half percent tax cut from July this year already, that was already committed to.

MINISTER BILLSON:

‘At least’ was the term that the Prime Minister used in the Press Club address.

DAVID SPEERS:

Ok, so it could be more than that is the inference that it could be 2 percent?

MINISTER BILLSON:

I think the point the Prime Minister was making is, it is at least one and a half percent for small business companies. That many small businesses don’t operate as companies so my focus is on how can we best provide that…

DAVID SPEERS:

It’s something like seventy percent that aren’t incorporated isn’t it?

MINISTER BILLSON:

Yes, about two thirds aren’t incorporated and we are highly alert to that because we are the Party of small business and we’re …

DAVID SPEERS:

So you’re looking at doing something for them?

MINISTER BILLSON:

We are working on a range of measures to try and put that incentive in front of small business men and women to recover some of that 519,000 jobs lost in small business over the Rudd/Gillard/Rudd Government.

DAVID SPEERS:

I’m trying to be an ideas man here, what about an instant asset write off?

MINISTER BILLSON:

Well there is a range of measures and we have got, in my office alone and the work we have been doing, there is a good dozen or more ideas. We are working through which ones we can implement that are sustainable within the…

DAVID SPEERS:

Any that are jumping out off the page at you at the moment?

MINISTER BILLSON:

There are many that I get excited about but you know I am evangelical about small business so I get excited about anything that is supporting our small business…

TONY BURKE:

And you’re ruling out a small business asset write off?

MINISTER BILLSON:

I am not ruling anything out, we are doing important work and what is different about instant …

DAVID SPEERS:

I should point out, I should let you finish, but what people may have forgotten that you’ve binned the instant asset write off.

MINISTER BILLSON:

Labor claimed, and this is what…

TONY BURKE:

You’re not ruling out something you’ve just abolished?

MINISTER BILLSON:

This is very interesting, you have just had Tony saying ‘we are not going to deal with tax changes because they were linked to Gonski’ but they are happy to separate a tax measure that was linked to a mining tax that didn’t fund it. I mean, they have got a very short memory, and this is where Labor stumbles…

DAVID SPEERS:

Just to be clear, you said you’ve got about a dozen ideas. You said, and they’ll all be shared with the backbench.

MINISTER BILLSON:

We have bonded widely on them. We have engaged the small business community.

DAVID SPEERS:

So you are taking them to the backbench?

MINISTER BILLSON:

I have had some discussions with my colleagues and you would be very reassured to know many of our senior colleagues… And David, the good thing is the small business community knows the only friends they have in the Parliament are the Coalition so they are very forthcoming in ways in which we can recover the jobs lost under Labor, energise enterprise at that small business and family enterprise level.

That is good for the economy, that is the focus and what the Prime Minister reaffirmed.

DAVID SPEERS:

One of the potential problems here is going to be, if you do have a lower tax rate for small business, at 28 and a half percent, and yet big business are still stuck on 30 percent. It now looks patently obvious they will be, two different corporate tax rates, how are companies in the middle going to restructure to get the lower one? Tony Burke, do you see that as a problem?

TONY BURKE:

Well there’s some challenges in how it unfolds and so we’ve got to see the exact proposal because one of the reasons – there’s a whole lot of bills that go through unopposed within the Parliament that the Assistant Treasurer is always responsible for introducing where you’re constantly keeping pace with how people have changed their activity based on whatever the taxation rules are. Now, differential tax rates, the capacity for restructuring of businesses – how that unfolds is something that you really need the specific proposal but you’re asking the right question because it would be a perversion of the intention of that sort of change if it simply resulted in restructuring of companies which effectively becomes a red tape burden to …

DAVID SPEERS:

Because where do you draw the line? If it was a $5 million turn over or $5 million profit figure that was used when you crafted the Paid Parental Scheme that’s now gone. Rowan, this could be a bit messy for those who are anywhere around it…

ROWAN DEAN:

Yeah we should be reducing taxes across the board, on businesses, on individuals, as they have done in NZ, as they have done in the UK, elsewhere, and the reason we should be doing it is that is the way to grow the economy.

DAVID SPEERS:

And a 30% tax rate comparatively is pretty high.

ROWAN DEAN:

Absolutely. Also the minimum wage is the highest in the world.  Which is ridiculous.  Makes us uncompetitive. Now politically it’s impossible to scrap it. Now that’s another job killer that this government has put in, not this government, successive governments have put in place.  

Penalty rates things like that are all stopping jobs growth in the small business sector. Certainly small business people know, that you will go and employ more people if there’s less red tape, lower taxes, lower minimum wages, and so on, that’s the situation.

TONY BURKE:

Can I just give you an example of one of the complexities?   You referred then to whether or not the figure for eligibility was based on turnover or profit. Now, you get wildly different outcomes depending on how you do that.

For example if you have the sort of small business that I grew up in with my family where you are selling products, then there’ll be a big difference between your total turnover and your profit margin. If you are somebody who is running a services business, then you may well find your profit and your turnover figures are much much closer.

So those sorts of questions can also create a situation where you have two businesses doing it as tough as each other, but one because of the way this has been designed gets a very different outcome.

MINISTER BILLSON:

And all of those things are part of our deliberations, but none of those things, none of those things amount to a reason not to do it. None of them.

DAVID SPEERS:

But do they amount to a reason to keep all company tax the one rate 28.5%?

MINISTER BILLSON:

We have just had a long discussion about budget sustainability. Let’s be realistic here.

There aren’t large licks of cash David going around.

DAVID SPEERS:

But you began by saying what’s needed in the economy is growth.

MINISTER BILLSON:

Correct. And that is why we are looking at what we can do to energise enterprise at the small business and family level. 

DAVID SPEERS:

Wouldn’t a more competitive company tax rate do it?

MINISTER BILLSON:

But we still need to fund it.

We are not going to do what Labor did, and make all these promises that are unsustainable, feel pleased with ourselves and then gift the problem of paying for them to someone else. And particularly not the next generation.

We want lower, fairer, simpler taxes.

We cannot do the whole enchilada in one hit.

The budget just cannot support that.  But that does not mean we should not make a start, and where that start is needed is in the engine room of the economy, is in the small business/ family enterprise space and that is what the Prime Minister reassured the small business community through his speech to the National Press Club.

SEAN KELLY:

The Council of Small Business says… It’s worth looking at what the Council of Small Business has said on this because they came out the day after the Prime Minister’s speech to the press club, in fact that afternoon.

And said we couldn’t care less about a 1.5% tax cut.

MINISTER BILLSON:

Well I think that says more about the Council of Small Business than it does about the measure. So let’s have a look at where the rigour is.

SEAN KELLY:

By all means dismiss the entire Council of Small Business.

MINISTER BILLSON:

No, no, no, happy to engage them but if they are not the only view, the only voice.

SEAN KELLY:

What they then said, what they then said, were things which Rohan would probably agree with, which is that we should change the GST arrangements for online goods and also that we should change penalty rates.  And change other industrial relations laws.

Now there not things that I agree with, but they are things that some people in the Liberal Party agree with.  My point here, it’s not about which policy you should pursue, it’s that we need to have a robust debate on this. And to return to the point about the Prime Minister, the difficulty that we face, and the public’s fear right now is that we have a Prime Minister who has just openly declared that he is going to go to this budget timid as all get out. And that’s exactly what we don’t need.  A public debate in which there aren’t two clear sides being put and proper arguments being had.

MINISTER BILLSON:

But it does not matter Labor is going to oppose whatever the Prime Minister says.

SEAN KELLY:

That’s an interpretation.

MINISTER BILLSON:

We have got to get past this celebration of obstruction which is what your leader Bill Shorten described his year as. I mean if the public want to reward a celebration of obstruction - that was the way his year was characterised.

SEAN KELLY:

Sorry - did you just say that was a quote from Bill? Did you just say that was a quote from Bill? That’s a lie.

MINISTER BILLSON:

No it is not.

SEAN KELLY:

‘Celebration of destruction’?

MINISTER BILLSON:

My word celebration, his word obstruction.

DAVID SPEERS:

The other carrot that is being dangled by the Prime Minister again today is that he wants to put more money in the pockets of families to help with childcare. Is that a good idea? Can we afford that?

ROWAN DEAN:

No. And the point is as I said before, and back to the discussion we were having before. We have to get the cuts first.  Then start giving money, then start tax cuts and so on so that the economy grows.

The first thing is to identify where - and it would be great if you guys would help- identify where we can reduce our welfare spending, reduce our education spending, and reduce our health spending which is growing by billions. If we can reduce those three things then our country would be in a great position to afford tax cuts, to afford putting more money into families’ pockets. But at this point in time, until we get serious about reducing spending then we look at spending.

SUBMARINES

DAVID SPEERS:

In the few minutes we’ve got left, let’s try and solve the submarine issue if we can. That didn’t take long.

Does everyone agree that we need the best for the dollar, the best value submarine that can do operationally what we need it to do - whatever that actually is. Or is this actually a procurement project that should be about protecting jobs.

Tony Burke?

TONY BURKE:

Well you’ve got a number of different issues. It’s not simply a procurement…. It’s arguably probably the biggest procurement project we’ve ever engaged.

Ever. Ever.

DAVID SPEERS:

$20-$40 billion

TONY BURKE:

Now, I don’t think you can say price line is the only issue when you are dealing with something with significant security implications. You don’t get more significant to security than your major party defence fleet. So it’s not as simple as what you just described.

DAVID SPEERS: 

But it has to be national security, and value for money.

TONY BURKE:

That’s right, and it has to be consistent with what we told the Australian people we would do. Both sides made commitments about them being built in Adelaide. We did that.

DAVID SPEERS:

Yeah but why? Put aside what was said. Why is building them in Adelaide as important as those first two.

TONY BURKE:

Well no you can deliver those first two, and still work with the Australian Submarine Corporation. But there are different ways; I mean I’m not going to get in to the design of how the Government is going to deliver its own promise.

But what I will say is at the moment they aren’t clear. I mean you’ve topped the Brandis meta data interview this week with the interview on, about the submarines with a Senator I haven’t seen interviewed before, but it was an extraordinary occasion.  To basically go out there and you’ve got completely different views about what the Prime Minister promised to be able to win a vote in a leadership ballot.

MINISTER BILLSON:

Nonsense.

TONY BURKE:

You don’t think it had anything to do with the leadership ballot?  It’s a coincidence it just happened to happen the weekend before.

MINISTER BILLSON:

Absolute nonsense.  I mean it surprises me how little Defence acumen Labor has now.

The Kinnaird reviews. The two pass process. The clarity about capability. About timeliness. About value for money. About weapon systems. Propulsion systems. Designs. They always need to be developed.   And you get those conceptual and capability issues right first.  And then you look at how the implementation is established.

Bearing in mind the sustainment of these subs will be worth twice the value of the cost of constructing them. Now we know with the Collins Swedish design what do we have - an American weapon system, a French propulsion system, needed to be adapted.

I mean the simplicity with which Labor and others are talking about this.

It is not a matter of just buying a car off a showroom floor.

And we need to get a little more adult about the defence of our country.  You did nothing for six years, there is a timeline problem now so we do not have a capability gap.  These are important issues.

TONY BURKE:

Why did you make the guarantee?

MINISTER BILLSON:

Because the bulk of the work in Australia will be in Adelaide.  But that is not the only consideration.

DAVID SPEERS:

Okay but Bruce Billson is making the point though…

ROWAN DEAN:

It is a bit rich I’m sorry. Tony sits here, having and your right absolutely capability, and where it’s built and all the rest absolutely …you had six years, why didn’t you do it?

SEAN KELLY:

Tony was making a point about a promise to get a vote which Bruce promised ….and then talked about submarine capabilities for five minutes. It was very impressive but nothing to do with the point I was making.

MINISTER BILLSON:

You forgot about the fact this is about our national security. It is about the subs.   And Labor did not activate one naval building project in their entire six years. And now we have a construction issue.

SEAN KELLY:

He came out one day and said I won’t be voting for the Prime Minister in the ballot unless I get these subs.

He came out the next day and he said ‘I’m voting for the Prime Minister’.

DAVID SPEERS:

He put out a statement, I can bring it up for you, saying my vote’s up for grabs, I want something on the submarines.

ROWAN DEAN:

How is this different from Windsor and Oakshott?

MINISTER BILLSON:

It is as rigorous as its been. It has been that way since the Kennard reviews.

Labor went about it with the helicopter’s the naval helicopters.  The nineties (MRH90). The Sokorsky helicopters. Same thing.

Get the capability right and work out what is the most…

DAVID SPEERS:

Can you explain to us what the process now is?

MINISTER BILLSON:

We have not settled on - There has been no decision on what type of sub.

Because there are considerations about protecting our country.

We need to know what the capabilities of the possibilities are.  What we can do in terms of weapon systems, intelligence systems, surveillance systems, anti-attack systems.  What the range is. What its capacity is.

We have the best conventional powered subs in the world. That is a strategic edge. They are going to come to the end of their serviceable life. We want the best conventional…..

To the best of your knowledge, no agreement has already been struck with Japan?

No.  Because we have talked to the Japanese, we have talked to the Germans, we have talked to the French, we have talked to ASC. There are other naval construction interests, they are involved with the landing helicopter deck even in my fair city of Melbourne.

DAVID SPEERS:

Can I just finish on this. Would you be disappointed if you found out there was an agreement already struck?

MINISTER BILLSON:

Three is no agreement. The Prime Minister has made it clear. There is no agreement. He made that clear in the Parliament today.

I do not know why we keep chasing these rabbits down a hole when its been clearly made known who we have been talking with, what the process is. It is perfectly logical. Labor adopted it with naval helicopters. Why is there now this lack of knowledge?

TONY BURKE:

They were off the shelf. It’s completely different.

BRUCE BILLSON:

Do you not know anything about military helicopters?

DAVID SPEERS:

We are going to have to wrap it up there.

ROWAN DEAN:

Would have been better to build the subs rather than the pink bats and their school halls. 

BRUCE BILLSON:

We would have had change.

DAVID SPEERS:

Thank you all for being here tonight.  We really appreciate your time.

Thank you for your company at home. We’ll be back same time next week.

See you then.