MARK COLVIN:
Quick summation of the Budget in your own words to start with?
TREASURER:
Well, this is a Budget that gives Australians the chance to have a go, to invest, to grow their businesses, to help their families with more flexible childcare, and affordable childcare. It’s also a Budget that ensures that we continue to invest in national security, and shoring up our counter terrorism resources. It covers all the right issues that are appropriate for the time, but at the same time improves the Budget bottom line.
MARK COLVIN:
How can you do that when your receipts are down $52 billion dollars?
TREASURER:
Well, we’ve had to make some priority decisions in relation to where we spend money and how we spend money. In the case of childcare, unless we actually can get the savings through the Parliament, we’re not going to be able to do what we want in childcare. Ultimately, you can’t spend new money if you haven’t got the savings to pay for it. There are a range of different initiatives as well, where we’re asking people who want to invest in Australian housing, from overseas, they have to pay a fee. Backpackers from overseas working in Australia have to pay tax from dollar one they earn in Australia.
MARK COLVIN:
Those don’t sound like big amounts.
TREASURER:
Well, they all add up. They all add up, and if you count every individual penny, soon enough the pounds will come; as my mum used to say.
MARK COLVIN:
Sure. I was looking at some graphs that showed that Treasury, consistently during the mining boom, during the Costello years, underestimated revenues and since the GFC, have consistently overestimated them. Why do you believe the projections that you’ve got now?
TREASURER:
Well, because we’ve seen what looks to be the very worst in the fall of terms of trade pass us. We’ve still got a couple of years of headwinds, but we will see that through, because we’re starting to see very good growth in the rest of the world, compared to what expectations were 12 months ago.
MARK COLVIN:
But you’re forecasting 3.25 per cent growth next year, and 5.5 per cent.
TREASURER:
That’s further out, 2.75 per cent next year.
MARK COLVIN:
Sure, but those are big growth increases. Why are you so confident?
TREASURER:
Well, because that’s trend growth. That’s what Australia tends to grow at when it is growing. We’ve been at below trend growth for a number of years and we’ve taken the biggest hit on our terms of trade in 50 years.
MARK COLVIN:
So the economy’s a bit like an elastic band, it’ll just come back to pre-GFC rates?
TREASURER:
Well, it can, provided we keep working at it.
MARK COLVIN:
It’s a big assumption.
TREASURER:
No, it isn’t, because building free trade agreements is opening new doors for trade. Having a lower Australian dollar is helping our exporters. Diversification of the economy in China is actually good for our services exports, like higher education services, health services exported into China. But also importantly, we are actually seeing enormous potential growth out of India and a range of other places. And India will be our next China, there’s no doubt about that. India is the fastest growing economy in the world. As a country, they need to build the equivalent of a new Mumbai city every year just to keep up, and that is going to be demand for not only our iron ore over time, but also our gas and a range of other energy commodities we can get them.
MARK COLVIN:
So that’s the big gamble, because nobody really believes that China has got full 7 per cent growth and is likely to continue it.
TREASURER:
Well, I believe it. I believe it. Look, the growth will come off, the headline growth will come off from China, but the output from China and its contribution to the rest of the world is not diminishing. It’s still growing as an economy. The economy is twice the size of what it was ten years ago, with a bigger growth rate, so ultimately unless China has a growth rate of more than 6 to 6.5 per cent, they don’t create the jobs for the new entrants into the workforce each year. They start to have significant domestic problems, so China must grow because it has no choice. We will always be the beneficiary of growth in China.
MARK COLVIN:
You’ve got this big stimulus package for small business, which essentially lets them buy plant up to $20,000 and up to several times, if you’re opening a grass mowing business you could buy five little grass mowing tractors, and more or less set it up on the government.
TREASURER:
Well it’s not on the government, you’ve got to pay for it.
MARK COLVIN:
You’ve got to pay for it up front, and then depreciate it on the government.
TREASURER:
Well, the fact is you can depreciate those things over a number of years now, we want those businesses to go out and get the best equipment, and start to muscle up for the future.
MARK COLVIN:
What’s that going to cost?
TREASURER:
Well it’s part of the $5 billion package, where we’re giving a 1.5 percent tax cut to small businesses with a turnover of less than $2 million. We’re also, for those that are unincorporated businesses, we’re giving them $1,000, up to $1,000 dollars and a 5 per cent tax rebate and then the rest of it is going to be effectively about accelerated depreciation.
MARK COLVIN:
There’s something like two million small businesses out there, what if there’s a stampede? Your figures could really blow out.
TREASURER:
No, because ultimately they’re spending the money and that comes back through GST, it comes back through increased size of the economy, it comes back through more jobs and the personal income tax people will pay it. This is going to help to build our new economy. Small business is going to be the big employer. Small business is going to the big innovator, and we are targeting small business, two million of them as you say, to help to drive Australia’s future prosperity.
MARK COLVIN:
And why do you think that you are going to be able to succeed with multinational companies in clawing back tax that they’ve been hiding essentially, or moving offshore? Why do you think you’ll succeed where others have failed?
TREASURER:
Because we’ve been embedded in their businesses for months now. We understand their business model. I’ve worked through the G20 and the OECD, and together with my colleague George Osborne in the United Kingdom, to develop this sort of initiative that ensures that multinationals, and we’ve identified thirty of them, pay tax when they earn the profit. We are able to identify how much they’ve repatriated overseas, through what’s exotically called a double Irish-Dutch sandwich, which is a tax initiative, we’ve identified how much they move. We haven’t been able to identify how much profit, and how much taxable profit has been moved. We’ve got the strongest anti-avoidance laws in the world.
MARK COLVIN:
But this is very complicated stuff and do you have the people to do it, given that every time someone is good enough they’ll come and poach your people?
TREASURER:
Well we’ve got around 20,000 people in the Tax Office. I’m very confident we’ve got the resources to make sure this happens.
MARK COLVIN:
Final question about the politics of this Budget, is it going to be your last?
TREASURER:
I hope not. This is good policy, and good policy is always good politics.
MARK COLVIN:
Thank you very much.
TREASURER:
Thank you.