Event: Interview with Patricia Karvelas, Sky News – Karvelas

Date: 30 April 2017

Topics: Budget 2017, infrastructure, welfare, housing affordability

E&OE

PATRICIA KARVELAS, HOST: Can Scott Morrison do enough with infrastructure spending around this good-bad, good and bad debt distinction? Is that the sort of direction he should be taking, Jennifer?

JENNIFER WESTACOTT, BUSINESS COUNCIL OF AUSTRALIA CHIEF EXECUTIVE: I think the good-bad debt is sort of, look I think it is a bit of a distraction to be frank. I think debt is debt, it has to be paid back. The question is: who pays it back, at what cost, when we pay it back, what level of risk does it place on the budget?

I think the point he was making in his speech last week is, what do you spend it on? And his point is absolutely right that you should spend any kind of borrowings on those things that are going to increase the size of the economy, improve our economic future, rather than borrowing money to pay the weekly bills.

And so let’s see you know what sort of projects the government is going to apply debt to. Obviously we would expect them to have gone through a very, very rigorous cost-benefit analysis that those projects can be demonstrated to be those projects that are going to change our economic future for the better. So I think you know that’s really what people ought to be looking for. Are these the projects that are going to change our economic destiny?

And then of course – we have to remember though that you know if we’re going to start talking about debt we’re not talking about a free-for-all. I mean we’re in a low interest rate environment now, but you know that’s not going to be the case forever so we’ve got to be very careful about the sort of debt we take on and making sure it’s for the projects that have been through that analysis and are going to change our economic future.

PATRICIA KARVELAS: Cassandra you heard the Treasurer articulate this good and bad debt issue of course bad debt was described as you know welfare spend, and that’s a sector you represent, I’d bet you would contest the idea that it’s bad debt but doesn’t the Treasurer have a point that it is debt that doesn’t really contribute to the economy the way that for instance infrastructure does in terms of jobs and the other dividends you get from it?

CASSANDRA GOLDIE, AUSTRALIAN COUNCIL OF SOCIAL SERVICE CHIEF EXECUTIVE: Well look, if what the government is proposing to do is be clearer about borrowing that is done for capital you know expenditure and distinguishing that from recurrent expenditure that is a pretty normal approach to the way you understand your, you know, your position in terms of the overall budget and you know like Jennifer we do want to see really good public investment in infrastructure that is you know absolutely rigorously assessed.

We think one of the top priorities of course should be growing the stock of social and affordable housing and maybe the Treasurer this is part of what we might see in this budget is some of that kind of borrowing is understood to be in the capital expenditure bucket.

But of course the alarm bell for us is yes this way the government seems to be planning now to then put a badge of ‘bad’ over certain kinds of recurrent expenditure. And we’ve seen the government again go out of its way to vilify people on the unemployment payment, you know we’ve had stories about dole bludgers et cetera and this absolutely has to stop, Patricia.

We are in an economic environment where the Prime Minister himself said jobs growth is a priority. That means that we have a problem: there are not enough jobs for people and therefore you would expect to see that it’s good spending to ensure that people have access to a safety net and this idea that it’s sort of the big welfare blow-out is not correct at all when it comes to the spending on the unemployment payment which is you know in terms of growth is lower than real GDP, it is you know one of the smallest parts of the overall welfare expenditure - the big part, 40 per cent, is the age pension – unemployment payment is not the risk in the expenditure area.

I mean, as the Business Council and ACOSS have said in the past we need to be doing the big work on the areas of real growth which is in the retirement income system and in the health area, neither of which are bad, but we certainly know there is pressure there and we have to make sure that the dollars spent are really contributing positively to the core purpose of both of those programs.

PATRICIA KARVELAS: Jennifer, you’ve heard some of the reports around a crackdown on welfare recipients and people on the dole who don’t turn up to interviews for instance. Do you think that’s overreach or is it something that the BCA would support?

JENNIFER WESTACOTT: Well I think we need to put the whole issue of the Newstart Allowance into sort of context. As Cassandra says, it’s not actually the fastest growing area of welfare spending if you use that category and it is certainly by no means large.

Look there are many sanctions already in place for people who don’t attend interviews and don’t attend training and don’t look for work. The question is you know, how much more can you kind of do there before that in itself becomes counterproductive?

I guess what we have always wanted governments to be focusing on is, what is it that really helps people find a job, particularly long-term, very disadvantaged jobseekers? How do we actually get the training programs to work for them? Things like what we announced a couple of weeks ago, a cadetship program to help young people get a pathway into a large corporation, they get paid for sort of eight-weeks’ internship, they get money from the company to actually kind of help them with their study, those sorts of things, and the youth pathways project that the government announced last year. We want to see more of those programs so that young people and disadvantaged people can get a job.

But of course the most important thing that we’ll be looking for in the budget is, what are the steps that we’re going to take as a country to grow the economy and grow the job opportunities for all Australians, not just disadvantaged job seekers?

PATRICIA KARVELAS: I’d like to get both of your views on this, what looks like it’s likely to be in the budget, this housing affordability idea of salary sacrificing going to pre-tax effectively going to first homes. Is that a good idea, Cassandra?

CASSANDRA GOLDIE: Well Patricia obviously I just want to make a few comments on the you know getting tougher and tougher on social security recipients. Look this is for us to see this again being speculated as more of a crackdown, you know the language of dole-bludgers, the sort of trying to create the spectre that the problem is that people are lazy out there. It is not the fact. It is also not resonating in the public community. If you don’t, if it’s not happening to you that you’ve lost your job or you can’t get one you know somebody who is in that situation and I really would caution the government.

I think that, as Jennifer said, we know that we have one of the tightest controlled social security environments in Australia. The compliance system, we are spending enormous amounts of administrative effort on just compliance with people when far more of that could be invested in the sort of approaches which is about getting behind people and opening up their skills and education possibilities as we do this big work to try and open up jobs.

Now of course housing affordability is a national debate, it’s a national crisis, and as Anglicare Australia showed just towards the end of last week we are at the dire situation where if you’re a single person on the Newstart Allowance, just 38 bucks a day, if you’re a single person on the minimum wage, there is one per cent of rental properties that are affordable for you.

And so we had the government talking seriously about this and we seriously welcomed it. Many of us have invested time talking to the government about the kinds of policies that were needed. The one that’s been reported just now was not in there at all. So what are we doing here? Are we serious about housing affordability?

I mean that idea, as you know, as the opposition said, a form of that has been tried before, there wasn’t a lot of take-up to it, and in the end where are we going to spend the investment in this area? And it should be for those people who are really struggling the most, which is people on the lowest incomes and on very modest incomes who are trying to rent in the open market and there are simply not enough properties so we think the tax concessionary arrangements need to be dealt with to deal with the open market. And then we need to have the government making sure that the investment in social and affordable housing stock, the design is good there and there’s been plenty of good ideas put to the government. We’re not persuaded about this one at all.

PATRICIA KARVELAS: Jennifer I’ll give you the final word just broadly on what we’re going to see in the budget – the 10^thbudget deficit we’re heading for – it looks very unlikely that that’s really substantially going to be shifted if you look at just the basic reporting on this although we won’t know until of course that Tuesday when all will be revealed. Does that concern you? Do you think the government has lost its appetite for deep structural reform?

JENNIFER WESTACOTT: Well I think it is a concern. It should be a concern to every Australian that we’re into a decade of deficits because you know, what does that mean? It means that we’re borrowing money, as we talked about at the beginning, that’s a $12 billion cost per year that we’re paying off the interest, that’s money that we could be investing in schools, in health, in roads, in infrastructure, that we’re currently paying off that debt. So we should be worried about not being able to get back into a meaningful surplus.

I think the challenge is how you do it. Do you do it through ad hoc punitive cuts or do you do it through very careful, thoughtful redesign of the big programs of spending – health, education – so we get better outcomes at a lower cost?

We still want to see that in this budget, we want to see that in future budgets, and of course we want to see those actions that grow the economy by making the business sector more competitive, by dealing with our very uncompetitive tax system. We want to see the government stay the course on that and they’ve indicated they’re going to.

Look no one doubts getting the budget back to surplus is hard work and we’ve seen many attempts at it but you know we want to see that there’s a very, very serious discipline in terms of capping the spending growth and we want to see some serious effort in reforming the big programs of spending, the high growth areas so that we get better outcomes for our citizens, better value for money.

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