SARAH FERGUSON, PRESENTER: Tony Abbott says Australians will thank his government for the tough measures he's promising to deliver in next week's Budget, but just how much pain will the Coalition be willing to inflict on voters? Amanda Vanstone was a minister under the Howard Government. She also co-authored the Commission of Audit report.

Amanda Vanstone, welcome to 7.30.

AMANDA VANDSTONE, FORMER HOWARD GOVT MINISTER: Thanks very much.

SARAH FERGUSON: Now, we've just heard that the raise of the fuel excise looks very likely now. Do you think that's the right decision?

AMANDA VANDSTONE: Well, I'd really rather wait and see what they actually decide to do, but, I can say this: we can't just keep going as we are. We have to make change. We have to stop spending and we have to raise money. The alternative to that is to keep going with a heap of debt. And if I can just go back to when the Rudd-Gillard Government came in and there was no debt, we had a Global Financial Crisis and they were easily able to spend lots of money. I think too much and spend it badly, but they were able to get the money without our economy suffering too drastically to keep things going during the crisis. But now we've got a lot of debt and what happens if there's another financial crisis? Is anybody prepared to bet their life on the fact that the world economy is so stable that that won't happen again? Well, I don't think so. So our task is to get our economy back to future-proof it for future generations and in the event of another financial crisis, so we have to do some tough things.

SARAH FERGUSON: A lot of business leaders and indeed a number of people in the Liberal Party have said one of the last things you want to do right now is introduce new taxes as that could have a negative effect on the economy. You've criticised the deficit levy. How much damage do you think it could do?

AMANDA VANDSTONE: Well I think all of the things in a budget need to be looked at together. It is a dangerous thing to simply look at one aspect. For example, one might say, well, you'd have an effect on the economy if you introduced - reintroduced indexation of excise on fuel. But then, if you're going to go into - and I don't know that they are - big infrastructure spending, well that's a boost to the economy. So, it's a bit like a game of pick-up sticks, a budget; you can't always look at individual things in isolation. People want to of course when they lose something or they have to pay more, but...

SARAH FERGUSON: And in fact - forgive me for interrupting, but you have actually isolated that deficit levy yourself and said - and criticised it. Do you hold to the criticism that it's a bad idea?

AMANDA VANDSTONE: Well I was asked about it and what I said - I don't have the exact words in front of me - is that I think a short-term levy is a short-term Band-Aid measure. It's better to do long-term structural things. But I did add: "But if the Government wants to bring the budget back into black more quickly, that's one way you could do it." So let's not pretend that I came out and said, "That's a terrible idea. They absolutely shouldn't do it."

SARAH FERGUSON: But at the same time, do you think that it's potentially a costly political mistake as well as possibly damaging to the budget?

AMANDA VANDSTONE: Well, I think any negative measures are difficult politically. I had that experience in 1996 when my portfolio found a quarter of the budget savings. But I'll tell you what's more costly, and that's to sit on your backside doing nothing, taking your pay as a minister and not getting on and fixing things. Now we all grumble about change, we don't like it, especially when it affects us, of course we don't, but what we expect our government to do is get things right. Fix it for the future, take the burden off the next generation, and over the longer term, if they do that, they'll get credit for that.

SARAH FERGUSON: Now, Peter Costello's been very frank about one of - what he regards as his biggest mistake, the surcharge on superannuation. Is that the mark of an intelligent man, to be able to admit to mistakes like that?

AMANDA VANDSTONE: It's the mark of any intelligent person to be able to admit when they're wrong and take responsibility for mistakes that they've made.

SARAH FERGUSON: So do you think that the Government, the current government should listen to Peter Costello when he criticises the deficit levy, for example?

AMANDA VANDSTONE: Well, everybody's entitled to their view. You see, when I say I don't care about different views, I don't mean that I'm not if interested. I mean that this is a democracy and there will be different views on a whole range of things. But, Peter's had his time in; I had my time in. I'm happy to wait and see what the Government does. We'll all express our views. There'll be disagreement on some and agreement on others things, but in the end it's the whole package and whether that puts Australia in a better position, whether it leaves a lesser burden on the shoulders of the next generation. That's what I'm looking for.

SARAH FERGUSON: Yes, and that's what you were asked to do in the Commission of Audit. But I wonder whether you think now that having looked at the whole package, as you put it, that Tony Abbott made too many promises before the last election that constrains him now.

AMANDA VANDSTONE: Well, promises can be a little bit constraining, as you rightly identify, but we almost ask that and the media demands it. "What are you going to promise us?" we say.

SARAH FERGUSON: It doesn't look like Tony Abbott went unwillingly into that field though, does it?

AMANDA VANDSTONE: Well, you say that, but, I mean, it's a part of political milieu in Australia that people try and corner you into locking yourself in.

SARAH FERGUSON: But should he have resisted those promises then?

AMANDA VANDSTONE: Almost, may I say, so that they can come back later and say, "Ahahaha." Now, all of that is very interesting. It could be the subject of a PhD that someone might do - not me, incidentally, but, you know, someone might.

SARAH FERGUSON: And not tonight, probably.

AMANDA VANDSTONE: But the real issue is: where do you want Australia to go? I mean, these other issues are interesting, sure, but where do you want Australia to be? Do you want your kids to carry the burden? How can we fix it? That's what we should be focusing on.

SARAH FERGUSON: Alright. Let's talk about that because that was the job of the Commission of Audit. But at the same time, you knew that a number of the recommendations you were making would be considered politically impossible. Did you really expect the Government to accept all of those recommendations?

AMANDA VANDSTONE: Well I don't think it's for any commissioner or the commission as a whole to say, "We expect you to do this." We were asked for advice as quite an eclectic group of people to come together with a wide range of experience and say, "What do you think is in the best long-term interest of Australia?," and we presented them with a package of measures. I don't think we had any belief that everyone would be accepted, because a budget is, as I say, a package. There will be obviously some savings measures in the Budget, some spending measures of which I'm unaware and maybe some revenue measures that the Commission of Audit wasn't asked to look at because there's a separate body looking at tax measures.

SARAH FERGUSON: Although actually - although you weren't asked to look at revenue measures, there was mention made of the GST. Now I don't know if you heard the other day Jeff Kennett made some very strong remarks about the lack of courage in this particular government and in particular in relation to the GST. Are you in favour of what Kennett is calling for, which is a raising of the GST?

AMANDA VANDSTONE: I didn't see what Jeff had to say, but I can say this: it's very clear if you look at the commission's work that the states don't collect enough money to discharge their duties as state governments. The Commonwealth collects more money than it needs and then hands money out to the states. This results in tremendous overlap, which is just a pain in the neck for everyone, because the Commonwealth says to the states, "We'll give you billions of dollars to do this," but of course then they insist on bureaucrats double checking that the states actually do it. And then the state governments want to check that people have actually done the right thing with the money.

So, we're all driven mad by endless reporting and overlap and duplication. Now if you could get rid of that, you would simplify government in Australia. One way to do that would be to increase the GST to give the states capacity to raise taxes. They would then be able to say, "Well we're going to do entirely as we please." One set of questionnaires for you and I to answer and much simpler government. So, yes, in the end I think we're going to have to raise the GST to give the states the money to do the job we want them to do without the Commonwealth interfering.

SARAH FERGUSON: And just quickly, do you think this government has the courage to accept that recommendation of yours that they raise the GST?

AMANDA VANDSTONE: Oh, I'm not a courage-o-meter. Let's wait and see what they're prepared to do in the Budget. I'll be interested to look at the whole package and I hope we all look at it that way, not at just individual items.

SARAH FERGUSON: Amanda Vanstone, thank you very much indeed for joining us.

AMANDA VANDSTONE: Thanks very much.