STEVE AUSTIN:
Joe Hockey, good morning to you. Are you concerned about the turmoil on global stock exchanges at the moment, Treasurer? Morning to you.
TREASURER:
Well, good morning Steve and thank you for having me on. Look, the markets will go up and down and we have seen a fairly lengthy period of extraordinary movement in markets. The fundamentals are still good for the global economy and particularly for the United States economy which is growing relatively strongly and now has full employment. So, overall I’m more positive about the global outlook. In terms of individual market movements, there are going to be some factors over the next few months that will cause some volatility in the markets, particularly, any decision by the United States Federal Reserve to increase interest rates, and they’re meeting in mid-September. So the world is watching carefully what the United States does with interest rates. If they do increase their interest rates, then you’ll see a movement of money from some equity markets to probably into bond markets. But we’ll wait and see.
STEVE AUSTIN:
What are the effects of this volatility on Australia’s economy?
TREASURER:
Well, it is mainly going to have an impact on confidence and that’s why we’ve got to continue to remind Australians that we have one of the fastest growing economies in the world at the moment. We’ve certainly got increasing workforce participation which is an encouraging sign. We’ve still got unemployment too high, across Australia it’s coming down, although I’m very mindful in parts of Queensland it has been going up as a result of the transition from a mining production phase and a mining construction phase, into a mining production phase, and more broadly into a service oriented export industry across Australia. So, the transition in the Australian economy is having an impact on jobs in some parts of Australia. But we’ve got to lift everyone, and that’s what we’re endeavouring to do.
STEVE AUSTIN:
I’m not sure if you heard her, but I spoke with the Mayor of Townsville briefly, Jenny Hill, and Michael Roche from the Resources Council about the Carmichael mine. Jenny Hill’s point is, that so far the plans for improving Northern Australia are bypassing big industrial places like Townsville, which has a 20 per cent youth unemployment rate. Are you planning to do anything about that? Because tourism is not helping with the transition out of coal mine openings to a more stable resources aftermath?
TREASURER:
Well, the starting point is, we are doing everything we can to help to get the Adani Carmichael mine open, and in fact in the last week of parliament we were prosecuting the case that it is plainly ridiculous that environmental groups, in Mackay for example, funded by NSW environmental lawyers, is able to challenge a mine 600 kilometres away and hold up approvals. Now I spoke to Curtis Pitt, the Queensland Treasurer, about this on Friday. We are working together to see what we can do to further encourage Adani to continue with the mining process, but…
STEVE AUSTIN:
Well, they said in the Weekend Australian newspaper that they are going to continue…
TREASURER:
Yeah, yeah. Well, one of the things they’re looking at is how we can ensure that the railway line remains financially viable. And I can’t give away too many details but we’re working away at that. The second thing is, in relation to your previous caller, our Northern Australia policy is a bold proposal that involves more than $600 million of new additional roads in regional Australia, in Northern Australia. But also a $5 billion loan facility – concessional loan facility for major projects. I have already received a request for information for more than a dozen different projects in Northern Australia and many of them multi-billion dollar projects.
STEVE AUSTIN:
Any of them from Queensland?
TREASURER:
Oh yeah, in fact, most of them are from Queensland I would say.
STEVE AUSTIN:
Like what?
TREASURER:
Well, for example, a proposal came to me recently for a speed up in the upgrade of Cairns International Airport. Currently, the billion dollar expansion of the airport is projected to take 20 years. They think that they can get that down to five years and they’re ready to start work immediately if the fundamentals are right, and that’s certainly a project that we’re looking at. I must say, Ewan Jones, and a number of others have come to me about projects for Townsville. I have said to them that we are able to use Northern Australia infrastructure facilities for productive investment in Townsville. That doesn’t mean spending $200 million on a football stadium. It actually means upgrading the ports and railway lines and ensuring that the port of Townsville, is potentially able to take greater advantage of what could be a new potential railway line from Tennant Creek to Mt Isa and an upgrade in the railway line from Mt Isa through to Townsville. So these sorts of projects are very much at the forefront of our minds, so we can get the whole of Queensland and the whole of Northern Australia working.
STEVE AUSTIN:
My guest is Australia’s Treasurer Joe Hockey. Why are you again, raising the possibility of lowering the personal income tax rate? Is this to inject money into the Australian economy because you’re looking at the volatility in the global economy – global markets?
TREASURER:
Well Steve it’s hugely important that we provide people with an incentive to work harder and earn more and participate in work. This is absolutely fundamental to our future growth. Firstly, we want to encourage Australians to continue to participate in work. And we want to encourage other Australians to create jobs. So, at the moment, when you have wage growth and you have inflation, basically, people’s wages naturally increase. The tax rates and tax thresholds remain the same, they’re not indexed to inflation. And as a result, people are pushed into higher and higher tax brackets. The challenge is, over the next few years, an Australian earning average earnings, of $77,000 dollars a year – that’s the average wage in Australia, believe it or not, just over $77,000 a year – they’ll be pushed into the second highest tax bracket which is 37 cents in the dollar at $80,000. So what that does, it becomes a disincentive for people to take the extra shift, or to put in the extra effort, and that in fact, harms the economy and it harms jobs growth.
STEVE AUSTIN:
But Australia’s economy is outperforming the rest of the world as you often point out, doesn’t it indicate that we don’t actually need personal tax cuts? What we do need is a bit of a healthier bottom line in the Government coffers, and let bracket creep do its job?
TREASURER:
Well, we obviously need a healthier bottom line for the Government’s Budget, but we’ve got to prepare for the future…
STEVE AUSTIN:
But Australia’s economy is outperforming the rest of the world, isn’t it Treasurer?
TREASURER:
Well, it is at the moment, absolutely…
STEVE AUSTIN:
So why do we need personal tax cuts if we already outperforming the rest of the world?
TREASURER:
Because you never sit on your laurels. You never sit back and wait for the rest of the world to pass you by. And the fact is, for example, New Zealand has a top personal tax rate of 33 cents in the dollar, 33 cents in the dollar. We have a top personal tax rate of 45 cents in the dollar plus a 2 per cent for the Medicare levy, plus 2 per cent for the Temporary Budget Repair levy, so 49 cents in the dollar. Sooner or later, people start to move to New Zealand and that’s what’s happening. And in fact in the last 12 months, for the first time in years, there were more people moving to New Zealand than there were than New Zealanders moving to Australia…
STEVE AUSTIN:
So, there are more Australians moving to New Zealand? There are more Australians moving to New Zealand now, than there are the other way?
TREASURER:
There are more people moving from Australia, including former Kiwis, there are more people moving from Australia to New Zealand last year than there were for the first time, New Zealanders moving to Australia.
STEVE AUSTIN:
And you feel that’s because of income tax levels here in Australia?
TREASURER:
Part of it is that, unquestionably. Because the evidence we’ve seen is some high net worth individuals moving to New Zealand. Yes, we’ve seen that. But it’s not just New Zealand - there are other countries around our region that have lower taxes. At the moment their economy’s not performing as well as ours. But sooner or later they’ll pick up. Sooner or later they’ll pick up. And as their economies pick up, Australians will find it more attractive to move offshore, and the interesting thing is Steve, and this is a great opportunity for Australia. Is for all of our history, Australia has been burdened by being a long distance from the rest of the world. The world now, because of the internet, because of mobile telecommunications, the world is divided into three time zones, the Asian time zone, the American time zone and the European time zone. We can sell our products and services into Asia immediately because of new technology. That means it doesn’t matter where you live, it doesn’t matter where you live - you can have the same commercial benefits. So what we’ve got to do is make sure that our tax rates are competitive, so smart Australians don’t say, oh well, I might as well live in Singapore or live in Hong Kong, or go to some other place where the tax rates are lower and I can make my money and come back and retire in Australia.
STEVE AUSTIN:
So will there be cuts to personal income tax rates in the next Budget?
TREASURER:
Well, this is what we’re working on. And the starting point is it’s not just about personal income tax rates. It’s also about the interaction with other taxes. I think that is hugely important…
STEVE AUSTIN:
So, while you’re raising it, you don’t actually know if and when you’ll bring in personal income tax rates?
TREASURER:
Well, no, we are working on detailed plans about taxation change. I mean, I met with the state treasurers on Friday, where we spent Thursday night and Friday, we spent about five or six hours just talking about taxation reform, about potential changes in taxes at a state level, taxes at a federal level, we talked about the international threats to our tax base - about the role of multinationals in that and how we’ve got to make sure that the multinationals pay their fair share of tax in Australia. We also said…
STEVE AUSTIN:
Let me ask you about that, let me ask you – what are you doing about that? When will enforcement be actually taken against low tax paying multinationals?
TREASURER:
Well, it’s already started because we have a taskforce in the Australian taxation office who have been able to recover around $400 million more than what was previously collected. But what I did when I became Treasurer, Steve, I asked the tax office to embed people in the multinationals that are perceived not to pay tax, and are paying very little tax. So we embedded our taxation office officials in their businesses in Australia, worked out how they structured their businesses. We’ve identified that 30 companies, major multinationals in particular, were shifting profits from Australia to Ireland, down to the Netherlands, across back to Ireland and over to the Bahamas or the Cayman Islands…
STEVE AUSTIN:
So, when will some sort of legal action be taken – enforcement action be taken against those 30 companies that you’ve identified?
TREASURER:
In the next few weeks I’m introducing the final legislation into Parliament, which is going to give us the power to go after those particular companies. It’s no use introducing legislation that doesn’t work, and so it is very, very technical legislation. I’ve also formed a partnership with the United Kingdom Government, the Chancellor of the Exchequer which I announced a few months ago. And we’ve had both our tax offices working together to better understand how these people are not paying their fair share of tax. And we are introducing legislation that is going to penalise them, up to 100 per cent of the tax they owe, as well as the tax they owe.
STEVE AUSTIN:
I’m talking with Australia’s Treasurer, Joe Hockey. What’s the higher priority, delivering personal income tax cuts or returning the Budget to surplus?
TREASURER:
Well, it’s both Steve.
STEVE AUSTIN:
But which is the priority, though?
TREASURER:
We’ve got to try and do both. They’re not mutually exclusive. And we illustrated that in our May Budget where we were able to give small business a $5 billion tax cut – the biggest tax cut small business have ever received. They now have the lowest taxes small businesses ever have in Australia, at least since the 1960’s I should say. And we’re able to do that by finding offsetting savings. Now, it is hugely important that we have targeted tax cuts that help to grow the economy. Because only by speeding up the economy, and giving people an incentive to have a go, are we going to create jobs which in turn helps to create greater wealth, and then gives us more revenue. I mean, that’s a good thing.
STEVE AUSTIN:
I’ll leave it there Treasurer, thanks for your time.
TREASURER:
Thanks very much Steve.