3AW – Afternoons with Tom Elliot

Simon Birmingham: Hello, Tom. It’s great to be with you.

 

Tom Elliot: Great, we’ve got the line working again. Now, there’s a really big number in the Budget figures and its $1 trillion. That’s where Federal Government debt is expected to peak in the next few years. I accept that in a pandemic, you know, you’ve got to spend up big and the Federal Government has the capacity to spend up more than what state governments do. But as Finance Minister, are you a little bit worried about having to manage a trillion dollars worth of debt?

 

Simon Birmingham: Well, Tom I would wish that we weren’t in the circumstances that we are with the global pandemic and the challenges that it brought about. We handed down a Budget last night that shows that the projected levels of debt are actually going to be lower than we had forecast in the Budget handed down last year. So we have managed to rein in some of that debt as a result of the stronger economic performance of Australia and the strong management that has delivered record recovery in terms of jobs across Australia. And our plan is to keep building on that economic strength. But also we’ve had to take some decisions in relation to some key areas of central services for Australians and honouring promises we’ve made to fund those essential services.

 

Tom Elliot: Sure I get that. But it was only, you know, not even 15, actually it was 15 years ago when Peter Costello, former Liberal Treasurer, eliminated the Federal Government debt. And I remember the stories back then, they we’re worried that there wouldn’t be a market for Australian government debt because there wasn’t any of it. That day of being debt free seems a long time ago now, doesn’t it?

 

Simon Birmingham: It really does, Tom. That’s definitely true. But what we are dealing with are profoundly different circumstances. COVID-19 pandemic has been the biggest shock to the global economy since World War II. Countries around the world have seen huge escalation in their debt. And for Australia, thankfully, thanks to the work that Peter Costello and John Howard did and indeed the work that we’ve done to bring the deficit back to basically a point of balance pre-pandemic under our Government, we went into this crisis with much lower debt levels than most other developed nations. We’re going to come out of it with much lower debt levels than most other developed nations as well.

 

Tom Elliot: But by our standards or by our standards, very high debt, though.

 

Simon Birmingham: Indeed, indeed, as we’ve had high debt previous times in our history following such global crises. And of course, what we do is we have to grow the country, the economy, jobs and revenue out of those circumstances. And that’s exactly what we’re focussed on doing.

 

Tom Elliot: Now, what about some of the other assumptions you’ve got? You know, growth is going to be, you know, around 4½ per cent this year, dropping back to 2½. I guess that’s a bit of a it’s a snap back from a terrible year last year. But iron ore, we are making a motza out of selling iron ore to the Chinese. I heard Josh Frydenberg talking about this this morning. But are we not also a bit worried that China’s belligerent attitude towards Australia means that we can’t take perhaps those iron ore sales for granted going forward?

 

Simon Birmingham: We framed this Budget against a very cautious and conservative assumption. So in relation to iron ore, we project that the price which has been skyrocketing in recent times, comes back down to a more traditional $55 a tonne price. And in fact, it’s during our time frequently been above that level. But we’re taking the cautious approach in terms of, in terms of, the pricing that we expect. And the Budget also deals with some of the tensions that exist in the China relationship. And in terms of the economic predictions and forecasts that Treasury make, they’re very cognisant of some of those trade actions that China has taken against our barley industry and our wine industry quite unfairly. So I think you can see that the type of assumptions we’ve made in the Budget are designed to give the document integrity. And indeed, one of the international ratings agencies today, Fitch Ratings, was quoted as saying that the underlying Budget assumptions appear credible, including the conservative use of iron ore price and employment forecasts show internationally they’re running that ruler over the Budget and can see that, as we’ve always done, we’ve sought to be cautious in those assumptions so that the Budget forecasts we make have credibility even in these very uncertain global times.

 

Tom Elliot: Now, what about overseas travel? I saw that you don’t anticipate the borders opening at all until midway through next year.

 

Simon Birmingham: Again, that’s another cautious assumption that we’ve put in. And it is just that it’s an assumption to give us Budget forecasts and projections. It’s not yet a decision of Government as to when those borders will reopen, because there are many variables that will have to factor in and most importantly, it’ll be the health advice that determines that. And the most important COVID related factor in terms of our economic position and our Budget position is to keep the suppression of COVID across Australia ongoing. Now, our international border controls have been an essential part of that, right, since February last year when we took the action to close the borders to China and we want to reopen them as soon as we possibly can, but will only do so when it is safe to do so.

 

Tom Elliot: Well, speaking of health advice, sorry to interrupt, but I mean, you know, one of the big bits of health policy which hasn’t gone all that well is vaccination. Now have you got an assumption in there for when the vast majority of Australians will be vaccinated? Is it late this year or early next year?

 

Simon Birmingham: So the Budget, the Budget assumes that that will have a nationwide vaccine program operational by the end of this year,that is providing access for those Australians who are eligible and want a vaccine to be able to all get one. But the vaccine program has faced many uncertainties to date. Things that we did not predict, such as the supply disruptions from Europe, such as, of course, the AstraZeneca setback and its limitation now to only those aged over 50. So that’s required recalibration of the program but we’ve contracted around 170 million doses to be delivered for Australia and Australians in our supply to the region as well. We’re confident that that we have more than enough vaccine doses will be delivered to Australia to make that available through the course of this year. But no doubt there will be other variables, such as some countries now getting the medical advice around vaccination of children, which is not currently part of our program. We’ll have to consider as we move through this year and into next.

 

Tom Elliot: Now, what about quarantine? As we know, a hotel quarantine as managed by the states has not always worked well, particularly here in Victoria. You know we’ve got a case at the moment where a guy appears to have caught coronavirus in South Australian hotel quarantine and he’s travelled to Melbourne and infected god knows how many people. Hopefully none. But we just don’t know yet. Why don’t you, as the Federal Government, take it over and build a handful of big centres like the one in Howard Springs outside Darwin? Build them around Australia, and manage it consistently at federal facilities, as opposed to leaving it up to the states who just use airport hotels and often stuff it up.

 

Simon Birmingham: Tom, right back at the start of the border closures when we had to deal with how we quarantined people coming back into Australia. We were looking at large empty hotels and accommodation blocks around the country that obviously provided a logical place that the health advice was where safe and appropriate to do so. And pretty much in all bar, of course, the tragic outcome that occurred in Victoria last year, states have managed their hotel quarantine systems well. We’ve had more than a 99 per cent success rate in terms of movements through those systems. And so we shouldn’t undermine the integrity and the success of that system across the country. Look, we have built an established and increased the size and capability of the national facility outside of Darwin, which will now and is now able to accommodate 2000 people passing through the fortnight. And we’ve indicated that we are looking very closely and positively engaging in discussions with the Victorian Government about the proposal that they’ve brought forward, which is the most detailed alternative that any of the states have presented today.

 

Tom Elliot: Well, just on that, I didn’t see anything in the Budget specifically about that Mickleham proposal. But are you prepared to pour some Federal Government money into it?

 

Simon Birmingham: We don’t know what to commit at this stage. We’ve been positive, I think, in our public response, saying that we want to work through this proposal with Victoria and we’re grateful that they’ve put a more detailed proposal on the table than any other states for an alternative. And not all states have sought the need to suggest any alternatives either thus far. But we’re going to work through with Victoria, this one. They’ve suggested we should pay 100 per cent of the cost. And there are factors that perhaps we might want to talk about. But this is something that in terms of expanding quarantine capability, we certainly recognise that it’s a discussion worth having.

 

Tom Elliot: What about aged care? I mean, you recently had the Royal Commission into Aged Care. There were all sorts of horrible stories that emerged out of the sector. I know a lot of money has been committed in this Budget to trying to fix aged care. How soon until people notice a difference? And do we have enough money to fix up all the recommendations made out of the Royal Commission?

 

Simon Birmingham: So our response to the Aged Care Royal Commission is a comprehensive one, and it touches across both residential care settings and home care settings. And it’s not just about the dollars, it’s about the reforms that apply as well. So, yes, we’ve budgeted some $17.7 billion over the next few years to achieve increased standards and quality in aged care. Of course, we are going to mandate changes such as minimum care times for residents in aged care, 200 minutes per resident per day of skilled care for them to receive at least 40 minutes of that to be delivered by a registered nurse. Now these are clear changes we’re putting in place. That will then have a tougher cop on the beat in terms of audits and greater transparency, in terms of publishing the standards of different aged care homes. Change to the way in which bed licences are allocated so that there will be greater freedom for people to choose the aged care facilities that get the best ratings and the best standards and that we drive that higher level of performance and a workforce challenge there that we are addressing with more than 33,000 places to train more skilled staff in the aged care sector. Plus then on the home care side, further 80,000 home care places being created to generate that real choice for Australians to be able to get care at home, if that’s what they what they choose in the circumstances allow.

 

Tom Elliot: Alright, a lot of that will depend on being able to bring in workers from overseas because the aged care system depends heavily on people coming from other countries. And another industry that depends heavily on people coming from other countries is, of course, higher education. Now, we’ve sort of built a university system which really works as degree factories for Indian and Chinese students. Those students are not coming in in the numbers that they had done so for decades now. Are you going to try and do something about the university sector? Because from what I understand, it’s bleeding cash and they’re even telling local students not even to bother coming on campus anymore, just to study online, which I don’t think is acceptable for, you know, for university students.

 

Simon Birmingham: So the uni sector we guaranteed minimum levels of funding for. Its $19 billion that unis are receiving through the course of this year. We also last year in recognition that some of the profits they generated from international students supported other operations. So in last year’s October Budget, we committed a further $1 billion for this year for universities to supplement their research funding and to support them through that. So we have firmly recognised that unis are in a unique position. Many of them are doing a very good job maintaining international enrolments through online means. But we’ll continue to work with that sector, having taken the steps already to make sure that there is a minimum guarantee in funding that they receive.

 

Tom Elliot: But sorry you have to accept that the rug has been ripped out from underneath and the structure they have is unsustainable. And as I said, they’re trying to cut costs by just having all students work online. And I just don’t think and universities are a Federal Government responsibility. I just don’t I didn’t hear anything last night about the world of the university is changed. What are we going to do about it?

 

Simon Birmingham: Well, look I think we have very strong funding models in place for funding domestic students in Australian universities, Australians who go to those unis. We’ve made sure that those funding models and the reforms we’ve enacted only in the last year or so are more tightly aligned with the cost of delivering a course. So the unis do receive that funding based on the cost of what it is to deliver a course for an Australian student who is attending that university. We took the step to guarantee the funding for unis. They’ve actually enrolled, about 30,000 additional domestic students during that time, and we gave them an extra $1 billion to supplement research funding. Now, it’s an important sector that we want to see continue to succeed. But it’s also a sector that, in terms of the business model that they’ve been operating for international students, does have to work through that period of adjustment. We’re helping them and we’re supporting them. But they also need to do the adjustment themselves too.

 

Tom Elliot: Thank you for your time. Simon Birmingham there, the Federal Finance Minister.