Transcript of interview – 7:30 Report
Ali Moore speaks to Anthony Albanese, the Minister for Infrastructure, Transport and Regional Development, who is in Perth for the first Cabinet meeting of the year.
Subject: Rates, inflation top Cabinet agenda
ALI MOORE: Amid fears rising inflation will push interest rates even higher, Prime Minister Kevin Rudd has moved quickly to establish his credentials as an economic conservative.
Today the Government unveiled a five-point plan to fight inflation including a pledge to slash budget spending and deliver a budget surplus of around $18-billion. The announcement also includes a strategy to tackle the skills shortage, deal with infrastructure bottlenecks and provide incentives to encourage private savings.
Already the Federal Opposition has criticised the plan, claiming it lacks substance. A short time ago I spoke to Anthony Albanese, Minister for Infrastructure, Transport and Regional Development, who is in Perth for the first Cabinet meeting of the year.
(To Anthony Albanese) Minister, the core of this promise to fight inflation is delivering a Budget surplus of at least 1.5 per cent of GDP, around $17 or $18-billion. In the words of Chris Richardson from Access Economics, even if you did nothing you could expect a surplus of around $15-billion, is 1.5 per cent of GDP enough to make a difference?
ANTHONY ALBANESE, MINISTER FOR INFRASTRUCTURE, TRANSPORT AND REGIONAL DEVELOPMENT: Well, if you look at the projections that were there from the previous government, they projected a surplus of just 1.1 per cent at the time of the Budget and 1.2 per cent during the election campaign.
So I think this is a significant commitment that the Government has made today. They’ve made it early, as part of the Prime Minister’s five-point plan to deal with inflation.
ALI MOORE: But given the strength of the economy and the projection for revenue, why not set the bar higher?
ANTHONY ALBANESE: Well, this is a decision made by the Government today. I think it’s a significant commitment and it is one part of a five-point plan, including, of course, dealing with the formation that the Cabinet has done today of ‘Infrastructure Australia’, addressing the skills crisis.
These are issues that have been warned by the Reserve Bank on 20 separate occasions over the last three years that they were placing upward pressure on inflation because of the capacity constraints that were there in the economy. So we’re dealing with a very tight fiscal policy. We said we’d be fiscal conservatives. Today’s commitment is evidence of that, and we’ll place a real constraint on the Government in the short-term. Of course, the longer-term issues are being dealt with by addressing the underlying capacity constraints in the economy.
ALI MOORE: I want to look at infrastructure in a minute, but if we look at those fiscal constraints, in the short-term you have identified $10-billion worth of cuts to Government spending and you’re looking for more. How much more?
ANTHONY ALBANESE: Well that will be determined. That’s not up to me, that’s a question for the Treasurer or the Finance Minister to answer. But what we’ve said today as a whole of Government approach and committed to by the Cabinet, is that we will have a 1.5 per cent target.
ALI MOORE: Cabinet is also committed to continuing with those $31-billion worth of tax cuts. Are you concerned about the inflationary impact of them at a time when inflation is continuing to bump up against the top of the Reserve Bank’s target range?
ANTHONY ALBANESE: Well, we’re committed to implementing the tax cuts, just as we’re committed to implementing all of our commitments that we made in the lead up to the federal election on 24 November last year. Of course, these tax cuts are giving back to working Australians and their families, they’re hard earned.
ALI MOORE: When you look at the whole economic outlook for Australia, I wonder if Cabinet discussed today what’s going on in terms of global uncertainty and global markets, which are certainly hitting our share market, the longest losing streak in well over 20 years. Was there discussion in Cabinet today about that, and about its potential impact on confidence in this country?
ANTHONY ALBANESE: Well, Ali, today was the first Cabinet meeting I attended in 2008. I have no intention of giving full briefings to the 7.30 Report, with due respect, on all of Cabinet’s deliberations. And nor would you expect me to.
ALI MOORE: Well, as you said, Cabinet’s now given formal approval for the setting up of ‘Infrastructure Australia’ with a 12 month deadline for a list of priorities. Is it really going to take 12 months to work out what Australia needs?
ANTHONY ALBANESE: Well, that’s not to say it will be the only business it will do, of course. We committed during the election campaign to firstly the creation of an infrastructure department and an infrastructure ministry. It’s important to recognise that hasn’t happened prior to December 3 of 2007. We committed to having the formation of ‘Infrastructure Australia’ within 100 days and now at the first Cabinet meeting of 2008 we’ve done that.
ALI MOORE: There was no discussion in today’s announcement about how you were going to fund infrastructure investment. Is the plan to also set up a building Australia fund?
ANTHONY ALBANESE: The plan is certainly to establish a building Australia fund, but importantly, ‘Infrastructure Australia’ will look at the sources of investment. We know, for example, that there’s $1.1-trillion in superannuation funds. Now superannuation funds are particularly suited to infrastructure investment because they provide a secure long term rate of return, and that is one area.
The private sector are telling us and have been telling government for many years, that there is capital available for investment in infrastructure. What they don’t have is a pipeline of projects and what they’ve been calling out for is a coordination body that can do that, that can work with the private sector. And importantly, ‘Infrastructure Australia’s’ board will consistent of 12 people, 5 of whom, including the chair, will come from the private sector.
ALI MOORE: So how much Government money, how much Federal money are you earmarking for infrastructure projects?
ANTHONY ALBANESE: Look, this isn’t about earmarking public investment in infrastructure. This is about making sure that we can channel the capital that’s available there into infrastructure. Now it may well be that some projects aren’t suitable for either private investment or for public private partnerships and, therefore, because of – there’s a social requirement suitable for public investment.
But the point is, at the moment we don’t have around Australia consistent guidelines for public-private partnerships that can facilitate that investment in infrastructure.
ALI MOORE: You say it’s not about public funds but the original policy was to set it up the building fund as a sort of adjunct to the Future Fund, is there no plan at all to put aside Federal money so you can set up these public-private partnerships?
ANTHONY ALBANESE: No, that’s not what I’m saying. What I’m saying is that further detail is an announced… is a, is for another day. And we’ll be making further announcements about some of the detail of ‘Infrastructure Australia’. But what we’ve done today through the Cabinet is to take this important step of putting in place the mechanisms so that ‘Infrastructure Australia’ can be established through legislation, so that we can continue the dialogue that we’ve had with the business community.
No less, of course, in a place like here in Perth where the infrastructure bottlenecks are causing massive capacity constraints on our economy.
ALI MOORE: Minister Albanese, many thanks for talking to us.
ANTHONY ALBANESE: Good to talk to you Ali.