SUBJECT/S: Labor’s 'Your Child. Our Future.’ Policy; The Budget and the Australian Economy; Labor’s Your Child. Our Future Education Plan; The Turnbull Government in Chaos; Election Year 2016; Kevin Rudd.

PETER VAN ONSELEN: Parliament is returning this week and our guest is the Manager of Opposition Business in the House of Representatives, Tony Burke. Welcome to the program.


VAN ONSELEN: Of course your other role, with your other hat, is Shadow Finance Spokesperson. You’ve got to make the numbers work on these spending announcements, one of which, during the week Paul Kelly’s just spoken about, is in the space of education. What about Jay Weatherill’s attack? This idea that it’s not fundable, essentially, under the current construct.

BURKE: Essentially Jay Weatherill’s comment - he proceeded by talking about health policy and education policy. Now, if he’s talking about health policy that we haven’t announced, well we haven’t made our big health policy announcements yet, so that’s neither here nor there. If the claim was about education policy, then it’s a comment drowning in ignorance. Completely drowning in ignorance. For the simple reason we have done what pretty much no Opposition for a very long time has done, and that’s announce our improvements to the Budget bottom-line well in advance of announcing any of the expenditure. So whether you go over the forwards or whether you go over 10-years, all the funding that was required for the announcement that was made on school education was provided last year. Some of it nearly a full 12 months ago.

VAN ONSELEN: But here’s the thing: you say that but your opposite, the Finance Minister, Mathias Cormann, his argument is that when you look at the Labor Party and what they’ve been promising to fund, there’s about a $60 billion, or thereabouts, hole in your finances.

BURKE: Ok, let me deal with both issues. First of all, to say we haven’t funded the education announcement, is to say that 38, which is the cost over 10-years, $38 billion, is a bigger number than $70 billion. Now if 38 is bigger than 70, we haven’t funded it. As long as 38 is within the envelope, then we’re doing ok.

The argument from Mathias Cormann though, when he wants to claim this 'Budget black hole’, he, in terms of overreach, has been extraordinary on this. So, anything that we have ever complained about he has presumed, in that $60 billion figure, that we would reintroduce the whole amount from day one. So even though Tanya Plibersek has said it would take a long time to be able to restore what this Government’s done in foreign aid, Mathias Cormann, when he gives you that number, presumes Labor would bring all the foreign aid money back on day one. 

Even though Bill Shorten in his Budget Reply said to get a further small business tax cut we would need to have bipartisan support and stage it over a number of years, Mathias Cormann in that number presumes that it would happen from day one. So, Cormann’s numbers are invented. There is no credible analysis you could put behind them. I wish he provided a bit more diligence, not to our numbers - you know who cares if he wants to make stuff up about us - but even to his own. Every time they go back to their own books, their own numbers get worse. They’re the ones in charge of the country at the moment. 

VAN ONSELEN: It’s reminiscent of Wayne Swan. 

BURKE: Look, every objection they made to us, their record has been worse in every instance. Whether it’s spending, whether it’s revenue, at every angle, whether it’s the deficit, every objection they made to us, their own record has been substantially worse. 

PAUL KELLY: The critique made though by the South Australian Premier is the precise critique being made by Turnbull and Morrison. You’ve said the Premier is ignorant, who’s going to straighten him out on this?

BURKE: Well, what I’ve said is if the comment is about education, then yeah it completely ignores facts that have been on the table some of them for nearly 12 months. To claim that something, when double the revenue has been put aside over time - yes there are other spending promises, but nothing that comes close to meaning we’ve spent what we’ve been talking about on improving the Budget bottom-line. 

VAN ONSELEN: Well let’s put it plainly, what’s Jay Weatherill’s problem then? I mean he’s on the same side of the partisan divide as yourself, is anyone in the Federal Labor Party talking to him? This isn’t the only issue he’s out there on, there’s the GST as well. He’s been shot back at in The Australian by Nick Champion who’s now trying to bind Labor, in his opinion, through the National Executive on this. Why is Jay Weatherill so off the page from where Federal Labor’s at?

BURKE: In terms of his comments on the GST and on revenue, I accept with that one the Government’s held a gun to his head with the cuts. Now the Government in their arguments still deny there are cuts to health and education, even though their own Budget papers from the day of the 2014 Budget have made clear that those cuts are there. That has put the states in an invidious position, and until we stepped up on the education funding, no one was talking about how to actually start to fix those funding shortfalls. So I can understand why he is in a desperate situation in trying to find money. On the characterisation of claiming that we haven’t funded our promises, it is just so demonstrably wrong that it needs to be called out. 

KELLY: Isn't there a problem here with the South Australian Premier? I mean this was a major initiative by Bill Shorten in the context of the election and it’s undermined immediately. What can Federal Labor do about the South Australian Premier?

BURKE: Well, rhetorically I accept in terms of the nature of how that comment has subsequently run. Whether he meant it about education alone or not, you can look at the transcript and you could probably argue it either way. But rhetorically, in terms of how it’s run, your point there is correct. 

My view on this, you argue back with the facts. If you’re in politics you accept sometimes there will be people, like Mathias Cormann, who will make up information about you that is untrue. Sometimes there will be people from your own side who get something wrong. On this, it is so demonstrably clear we have done what very few Oppositions have done and have all the improvements to the Budget bottom-line laid out well in advance of any announcement.

KELLY: Well if you look at those improvements, if you look at the $70 billion worth savings over the decade - to the extend that any such savings figure like that can purport to be accurate…

BURKE: Well it’s the Parliamentary Budget Office, there’s a fair degree of rigour. 

KELLY: Sure, we’re talking about a decade. You’ve got I believe $48 billion from the cigarette tax, $7 billion from multinationals, $14 billion from super, that gives you $70 billion - all taxation increases. Is the Government therefor correct in saying that Labor is a spend and tax party?

BURKE: Well you’ve also got the savings measures there, so let’s not ignore the abolition of the Emissions Reduction Fund where the projections haven’t gone out for a full 10-years on that. But given what the Government claims to have signed up to in Paris last year, you’re going to have to have significantly more savings there than we're currently even putting on the books because we’re being conservative there. But that fund designed to pay polluters is one that we would abolish. I don’t accept that you’ve only got the revenue measures, but I accept they’re the majority of that.

KELLY: Ok, well I think on the numbers they’re clearly the overwhelming majority. So if the overwhelming majority of so-called Labor ‘saves’ are taxation increases, isn’t the critique of Turnbull and Morrison in fact correct?

BURKE: When you’re talking about where those taxation measures go though, if they go to dealing with a significant health issue, as you have with the case of tobacco, or dealing with significant and unsustainable loopholes, as you’re dealing with superannuation tax concessions or multinational tax avoidance, then yes it’s a taxation measure but it’s hardly one that hits the ordinary household budget. 

This is where, if you were just doing the across the board hit, which for example something like a GST increase does do, then you’re hitting the household budget in a very direct fashion. When you are targeting unsustainable loopholes and making sure that they are addressed, then you’re gaining revenue in a much more responsible way. 

Now, it’s no surprise that the Liberal Party is opposed to this in the same way they opposed capital gains tax and fringe benefit tax decades ago. They will oppose the closing of these loopholes. But it’s a responsible way of gaining the extra revenue to be able to provide the investment in our schools that we need. 

KELLY: Ok, well the interesting thing here is that the revenue is going into social areas, clearly education and presumably, when the policy is release, I would imagine health. The other critique from the Government is that Labor doesn’t care about bracket creep, that Labor doesn’t care about personal income tax relief. Morrison is campaigning strongly on the need for personal income tax cuts. What’s your response to his critique that Labor doesn’t care about working Australians and the income tax they’re paying.

BURKE: The gap between Scott Morrison’s rhetoric and his record on this is breathtaking. We can go back historically and you know, your Hawke/Keating years where 60 per cent went down to 49, company tax down from 46 to 33. But even go more recently; let’s go more recently Paul because this is important. 

When we tripled the tax-free threshold from $6000 to $18,200 they voted against it. The one change they’ve made for people at the bottom end of the tax system is to increase the impact of bracket creep by - the bottom tax-free threshold that was going to go from $18,200 to $19,400 and they’ve stopped that. So there was a bracket creep avoidance measure built in and their action has been to remove that. 

At the top end of the tax scale they’ve added two per cent with their so called ‘deficit levy,’ which since they’ve introduced the deficit’s only gone up. Whichever end of the tax scale you’re at, Scott Morrison’s record has been to make bracket creep worse. That’s what he’s done. He talks about a lot, given, but there is nothing on the board.

KELLY: Ok, let’s just look at the politics of the 2016 election year. I mean every sign is that the Government is going to bring down a tax package in which there will be significant personal income tax relief. Is Labor comfortable fighting an election campaign in which you are funding social spending areas of health and education and the Government is offering significant personal income tax cuts? Are you happy with that sort of campaign?

BURKE: The reason I’m very happy with where the campaign’s headed in terms of being able to expose the true values of this Government, is the way they are talking about paying for those income tax cuts is with a GST hike. 

Now, bracket creep by definition means the personal income tax cuts are temporary, the GST hike is permanent. So, even if they have an equation where in the immediate term people can look at it and say ‘well if that happens I might not be much worse off right now,’ they certainly will be in the years that follow. Because inflation will mean the one you benefit from, the compensation allegedly with personal income tax, gets stripped away over time, and the GST, through inflation, only becomes a deeper and deeper hike.

KELLY: Ok, I understand your argument. I think what you’re telling me is Labor’s quite comfortable going into an election campaign not seeking to match the Government’s personal income tax cuts?

BURKE: They are talking about an argument which involves a hike in the GST and we are absolutely on for that fight.

VAN ONSELEN: And the point about that though, is if they want to put the GST up, whether it’s to 12.5 per cent or 15 per cent, they will do that and perhaps then fund income tax cuts. But those income tax cuts are only fundable because of such a significant increase in the GST. It’s an interesting philosophical debate we will have quite different - you know we won’t have Tweedledee and Tweedledum.

BURKE: That’s true, but it will be quite different to what John Howard did. Don’t forget, when John Howard introduced the GST there were a whole lot of taxes on goods already that were abolished, so the inflationary impact of what John Howard did was nothing like the 10 per cent hike. You no longer have a Wholesale Sales Tax to abolish. So, the five per cent increase from 10 to 15 is the full inflationary impact of what they’re talking about.

VAN ONSELEN: Let me just ask you another question on Labor’s overall attitude towards tax reform. How are you going to be involved in the tax reform discussion this year if you are, from the get go, ruling out the GST? It strikes me as an entire structure of tax reform that the Government is making this crucial component of. If you’re not wiling to be part of that debate, you can’t really cherry-pick can you from other parts of it?

BURKE: Well the Government has ruled out dealing with the loopholes as we’ve been dealing with the loopholes. So, their first action when they came in was to get rid of measures on multinational tax avoidance, they’ve now put something through the Parliament where they’ve got asterisks' but they’re not sure if it’s going to raise any money at all. They rejected outright what we did on superannuation tax concessions. Different parties will rule out different things based on what they believe in. 

Now, they’ve ruled out getting rid of these loopholes because apparently they believe in the loopholes. We’ve ruled out the increase on the GST because we don’t believe you should attack the household budget. Economically, let’s not just talk fiscally here, economically the story of the 2014 Budget was that if you attack the household budget, even if on Budget night it looks like you think you might be helping the Federal Budget bottom-line, ultimately you attack confidence at the same time. If you attack confidence that ricochets through the economy. 

KELLY: So you can’t attack the household Budget? You can’t apply spending restraint to the household budget that’s what you’re saying?

BURKE: What I’m saying is if you attack the household Budget, you attack demand. That will have economic consequences. 

KELLY: Ok, so what you’re saying is Labor won’t impose disciplines on the household budget in the cause of overall budget responsibility?

BURKE: Depends on whether you're talking - you’ve shifted…

KELLY: It sounds like what you’re saying.

BURKE: Paul you’ve shifted from the word ‘attack’ to the word ‘disciplines’. If you’re talking about something as constrained as ‘disciplines' there’s a number of measures there we did vote for. For example, the shifting of the cut off rate from $150,000 down to $100,000, measures like that we were willing to be a part of. When it’s a wholesale attack on the household budget, when you do that people stop spending and confidence takes a hit.

KELLY: Well, let me just ask you then: do you agree with Treasury Secretary Fraser that current spending levels are unsustainable?

BURKE: We have a spending problem and a revenue problem. 

KELLY: Do you agree current spending levels are unsustainable?  

BURKE: I’m agreeing to both. He made comments about spending levels and comments about revenue levels and I’m agreeing to both...

KELLY: But the speech - sure.

BURKE: The speech dealt with both Paul.

KELLY: The speech dealt with both but the speech makes it clear the fundamental problem is on the spending side. Let’s not get involved in a debate about that though. I just want to get a sense of how much Labor thinks there is a real spending problem.

BURKE: Ok, if you work on this base in terms of percentage of GDP, because I think that’s the most rational way to be able to deal with it. The last time you had broad balance in the Budget was 2002 where the figures were, as a percentage of GDP, revenue was coming in at 24.9 per cent of GDP and expenditure was running at 25. It’s about that 25 mark where you’ve got both expenditure and revenue and you’ve got a Budget in balance that economically works. 

Now, since this Government came in, expenditure has kicked over beyond the 25 per cent mark. Gradually bringing that down and working that down, is something that you want to be able to work towards. Similarly though, revenue which is much further away from 25 than expenditure is above 25, is something that also needs to be looked at. But when you deal with either of them, whether your trying to improve revenue or reduce expenditure, you need to consider not just the metric of are we at a magic number of 25, but how are you doing it. 

If you’re doing it in a way that attacks demand, either by taxing people in a way that hits the household budget too hard or pulling back expenditure in a way that’s not thinking about the future or about confidence, then even though the numbers might line up around 25, you’re going down a policy path that won’t work for the economy. 

KELLY: Yeah, but are you happy at the end of the day to have spending levels at around about 25?

BURKE: I think ultimately in terms of your structural budget that’s where you need to get to. But, let’s remember this, you will always have cyclical factors, and Fraser deals with this in the speech as well.

KELLY: He does, he does. But 25 is a high level historically. What you’re saying is you’re prepared to wear spending at that high level historically. I think that’s what you’re saying.

BURKE: Well at the moment we’re above it so the conversation is about trying to bring it down to that. Let’s not forget that during the last three years of the Labor Government, so once the stimulus spending was deal with, we kept it below 25 all of that time. It’s been above for the life of this government.

KELLY: Chris Bowen, the Shadow Treasurer, has called himself a Keynesian. Do you call yourself a Keynesian?

BURKE: Well yes.

KELLY: You do?

BURKE: And the best example of that, if there was ever any doubt, I believe was the impact of the stimulus package. If you’re going to adopt those principles at times of crisis, what you then need to be able to do is make sure as the economy improves you build back the stocks. 

KELLY: But Labor didn’t do that?

BURKE: As the economy improves. I’ve just gone through in terms of what we did on expenditure absolutely Paul we did. What happened was you had revenue shortfalls and revenue write-downs that went beyond the savings that we were delivering. That’s why our expenditure levels as a percentage of GDP were below 25, but what happened at the same time was revenue write-downs went way below.

KELLY: Well I think what actually happened was, if you look at the former Labor Government, at the end of the day the real priority became the commitment to big new spending, in particular Gonski and disability spending rather than achieving the surplus. So therefor can I ask you as a possible future Finance Minister, what will be the priorities you draw here between commitments to spending on the one hand in education and health and working towards fiscal consolidation on the other?

BURKE: Well, effectively you start with the principle your spending has to be strategic and it has to be smart. The Government has tried to frame the education announcement as though it’s just throwing money at education. You talk to, from a Liberal Government, the New South Wales Education Minister and you get exactly how strategic an investment that school funding formula is. So, you need to make sure the target of the investment is dealing with the economic challenge that we face. 

The economic challenge faced by Australia at the moment is one of massive transition post the mining boom. Massive transition. That’s why funding at school education, particularly in science, technology, engineering and mathematics is something that is critically economically important. So, you need to make sure your spending is smart, but you are constantly going through with the razor working out where different programs can be trimmed, cut or made tighter to give you that economic space. 

VAN ONSELEN: On that 10-year commitment around education that was announced during the week by the Opposition, what safeguards are there the states are going to spend that extra money well? We know that states essentially run the schools, whereas the Commonwealth they have to go to cap in hand for the money. My worry, and I said this at the time, my worry is that ok fine, for the out years of Gonski you’re reinstating what was in Commonwealth agreements already. But for a 10-year time horizon, you’re in a sense losing in your bargaining position as a Commonwealth Government when dealing with the states on funding arrangements and what structures might be in place in terms of what you’re going to get in response to the money you’re going to give to the states. 

BURKE: The problem largely arose by the current Government saying to the states 'you can spend the money how you want, we’re not going to hold you to those parts of the agreement.’ So, the only logically way for us as an Opposition to be able to deal with it was to say we would reinstate the agreements where they already existed, and you’d have to negotiate them for the states where they don’t exist. Then at the end of the agreements you renegotiate as well. 

But, I don’t think anyone would believe us if we put zeros in the foreword estimates or in future projections and said ‘oh we’re not even going to think about that’. Then quite rightly people would be saying ‘well hang on, Labor hasn’t come forward with a sustainable way of funding this and they haven’t budgeted for it appropriately.’

VAN ONSELEN: It’s a spongy give, it’s a spongy financial give if you haven’t got agreement on exactly what you’re getting for your buck. 

BURKE: I know from different portfolios I’ve held when in Government that you can negotiate in a way where you do what this Government’s done and you say to the states ‘here’s the cash, do what you want,’ or you can negotiate hard and get proper outcomes. On something like this funding it would be a real negotiation. 

VAN ONSELEN: So if they don’t come to the party with what you might request on school education outcomes, then they don’t get the money?

BURKE: Well the nature of a negotiation is that you reach an agreement for everything to flow.

KELLY: What about health. I mean we had the Abbott Government of course cutting back the funds to the states for both education and health. Now you’ve rolled out the education policy and we can clearly see that Labor is committed to full restoration. I know you haven’t announced a health policy yet…

BURKE: And not going to this morning.

KELLY: Of course not. But given what you’ve done with education, is it fair to assume that Labor will also make some sort of substantial financial commitment on health? 

BURKE: The attack on health from this Government has not only been about hospitals via state governments, it’s also been at the core of bulk billing and the Medicare system. So, there are a large number of fronts in the health debate that we’ve been fighting on. Now a number of those fights as they’ve gone on, the Government has conceded some of the ground and then tried to do things another way. So, exactly where the fight ends up on health is something that I’m not sure we know yet other than as part of a central theme there will be, I have no doubt, a fight over the future of Medicare. On those issues Malcolm Turnbull’s approach has been no different to Tony Abbott’s. 

VAN ONSELEN: Can I ask you about, putting your hat on as Manager of Opposition Business, Parliament’s back this week, it’ll capture headlines as a consequence and it’s an election year - does Labor have a changed strategy in 2016?

BURKE: Look I think one of the things, and I know as well you both have written about it, when a sitting Prime Minister gets knocked off in their party room, you unleash an entire Shakespearian tragedy, and we are watching the beginnings of that unfold. I don’t think for a minute the instability within the Government is about to stop. 

You don’t have to get very far even into the alphabet; you start with the ones going more directly against Turnbull’s approach, whether it’s Abbott, Abetz, Andrews. You then go to the ones with the gaffs and the scandals that turn up in the papers every day, Briggs, Brough, Bronwyn, Barnaby. You don’t get very far into the alphabet before you’re talking about chaos. That is where the Government’s at. Malcolm Turnbull won’t be able to unscramble that egg. 

So, we will see the year, and we’re talking about six months realistically, 37 Questions Times, before we’re likely to be heading into an election and in that period the weeks will be punctuated by fire within the Liberal Party against each other and that’s before you get to the fight between the Libs and the Nats. That I think will punctuate much of the year. 

From our perspective, the message which the public is starting to work out, but which I don’t think has really been fully understood yet, is the extent to which they might have liked Malcolm Turnbull in a lot of ways, but they’re not getting any of the policies they liked about him. Effectively, it’s like if you put gift-wrapping on your rubbish bin it doesn’t change the contents. They’ve put Malcolm Turnbull as the front person but it’s still Tony Abbott’s policies. It’s still Tony Abbott’s approach.

KELLY: Well what does Labor run on in the election campaign? What’s Labor’s pitch to the Australian people.

BURKE: It’s really simple. We have a situation now where the Australian economy is going to go through a big transition post the mining boom. Labor’s approach is to make sure that people are helped through that and we take them with us. That positions Australia for those next challenges. We’re in a world now where unless we get a new competitive advantage in areas like science, technology, engineering and maths, unless we make sure there’s new manufacturing opportunities in defence and renewables, then if we just think we can live the way we’ve lived for the last 20 years, with where the world economy’s now we miss a massive opportunity and many Australians will regret that deeply. 

KELLY: Just a side question. Can we assume that Labor would support Kevin Rudd for Secretary General of the United Nations? If in fact he declares for that position?

BURKE:  Yes. 

KELLY: No problem about that at all? You’re happy to see Kevin running the world?

VAN ONSELEN: There wouldn’t even be a slight doubt in some corners of the Labor Party whether he suited?

KELLY: There’ll be no complaints; there’ll be no sense of reservation from the Labor Caucus about this?

BURKE: On any of these issues when an Australian has run for an international position, there’s always been a Team Australia view. That’s always happened on both sides of politics.

KELLY: I’m glad we’ve clarified that.

VAN ONSELEN: Team Australia and Kevin Rudd, perfect way to end the interview. Tony Burke we appreciate you joining us on Australian Agenda. Thank you very much.

BURKE: Thanks. 

Tony Burke