MICHAEL BRISSENDEN:
While the tax debate has raged here, the Treasurer Joe Hockey has been in New York, hoping to get a better gauge on the international economic environment. His visit comes amid news of a weakening Chinese economy and warnings of further global downturn from the IMF and the World Bank. In the last few hours, Mr Hockey has been watching the trading himself on Wall Street and was granted the rare honour of ringing the closing bell on trading. I spoke to the Treasurer from the trading floor of the stock exchange a short time ago, and began by asking him about the latest Chinese economic figures that show that country’s economy is performing worse than expected.
TREASURER:
Well, I don’t agree, Michael. I think it actually is looking reasonably good. The numbers that have been released in relation to China are very similar to where we were at at the end of last year, and that is that you’d have growth falling in China to the point where it has a six in front of it. But that is off a much bigger base and the Chinese economy as it’s restructuring is providing new opportunities for Australia, particularly when they’re trying to boost domestic consumption and in domestic consumption there’s going to be greater demand for Australian services and obviously Australian exports like agriculture, particularly beef. But also there’ll be greater demand for our gas and a range of other things. So, I’m more positive about the world economy. Now, Europe has stabilised and is slowly getting better and in discussions with the Chief Economist at Standard & Poor’s this morning, there is a feeling that the world economy is getting better.
MICHAEL BRISSENDEN:
Ok, well the falling iron ore price, though, looks set to continue. It certainly sent everyone scrambling. Did you expect the West Australian sentiment to be so strong on the GST?
TREASURER:
Well, no, I didn’t because Western Australia has been facing in effect the perfect storm. They’ve had a significant drop in their percentage of GST revenue and they are now currently at 37 cents in the dollar. The recommendation of the Grants Commission is to go to 30 cents in the dollar.
MICHAEL BRISSENDEN:
But is that fair? That seems to be the bottom-line, doesn’t it?
TREASURER:
Well, it isn’t fair. I’ve said that it isn’t fair, I don’t consider it fair. And it does have an impact on the Federation, but it’s also the case that Western Australia needs to undertake some structural reform and when New South Wales has just gone through a very tough political fight over the sale of poles and wires, Western Australia still owns its TAB and still owns its poles and wires and at the moment has no intention of going down the road of microeconomic reform that other States have taken.
MICHAEL BRISSENDEN:
So do you support your West Australian colleagues who are urging that previous figure be frozen?
TREASURER:
Well, it’s certainly one of the options that I put to the States in discussions with the Treasurers and we are certainly interested in the feedback of the States. It is their money, the GST money, and it is their distribution. So we want their feedback, we want them to come to an arrangement and most importantly I think the other States are putting appropriate pressure on Western Australia to undertake the sort of difficult but absolutely necessary structural reform in the West Australian economy that is necessary for it to continue to strengthen over time. Simply, you know, Western Australia has antiquated laws in relation to retail trading hours or in relation to retail. For example, they have restrictions on the sale of lights at night time which creates real problems for lighting suppliers who are only allowed to sell, I think they’re allowed to sell light bulbs at night but not light fittings. I mean, that sort of antiquated regulation has got to come to an end.
MICHAEL BRISSENDEN:
Well, certainly, the other States don’t want the calculations changed at their expense. Would you support them looking at raising other state taxes? Because I think, as you know, South Australia says it’s looking at bringing back a financial institutions duty.
TREASURER:
Well, any state is entitled to introduce its own taxes. The Coalition has a view that we want lower, simpler and fairer taxes. Now, the States have been at war with each other over the years, they’ve eroded their own tax base by offering concessions in competition with each other. We are now in a world where the economy is not battles between the States, but battles between Australia and other jurisdictions around the world. So, what we’ve got to do is make sure that Australia has an efficient, a fair and a reasonable tax base and the States need to be part of that process.
MICHAEL BRISSENDEN:
I think what you want and I think perhaps what’s possible at the moment may be clashing, don’t you think? I mean you’ve got Peter Costello out there today pretty scathing in his assessment saying that, you know, you’re considering such new taxes like a bank transaction tax is hardly lower and fairer and that you’re not really doing anything about bracket creep.
TREASURER:
Well, I think Mr Costello is wrong. For a start, the bank tax was in fact a Labor Party tax and it was proposed by the Labor Party and built into the Budget by the Labor Party. And you know, quite frankly I really wish I had the revenue coming into the Budget that Peter Costello had when I was a part of his Government. If I had the same revenue as he had then I’d be getting $25 billion extra each year to be able to spend on things, but unfortunately we’re the equivalent of $25 billion a year worse off than what the revenue and taxes were in the Costello Budget. So, I’ve got to do more with less because the Labor Party locked in a massive amount of new expenditure and because they locked in that new expenditure somehow I’m expected to have a magic pudding and there is no magic pudding.
MICHAEL BRISSENDEN:
He is right about bracket creep though, isn’t he? Are you going to be doing anything about that in this Budget?
TREASURER:
Well, 86 per cent of all government expenditure is locked in by legislation. If the Labor Party doesn’t want to help us to reduce government expenditure, then the only way you would ever get back to surplus is by collecting more tax and part of that would come from bracket creep. Now, that’s not what we want. We don’t want average workers to be paying more tax, we do not want people in the second highest threshold to be paying, or people on average weekly earnings to move into the second highest tax threshold. We don’t want that either.
MICHAEL BRISSENDEN:
No, no, but what are you going to do about it?
TREASURER:
Well, we’re trying to reduce expenditure. That’s what we’re trying to do. So, I’d ask that question of Bill Shorten, what are you going to help the Government to do about it because every time we put up savings to the Senate, Bill Shorten and the Greens oppose them. They even oppose their own savings.
MICHAEL BRISSENDEN:
Joe Hockey, thanks very much for joining us.
TREASURER:
Thanks very much, Michael.