TREASURER:
Good to be back. It’s so nice to see you all.
QUESTION:
[inaudible] Chris Richardson’s forecast looks bleak?
TREASURER:
What the Deloitte report today, I think, highlights is something very important and that is that the revenue the Government receives is highly dependent on the wages that Australians are earning and the profits that companies are making. And this is why I talk about the challenges we have in revenue about it being an earnings problem. So we have to do things with economic policy, as we are doing, to try and ensure that people do get more hours each week. That productivity does mean they’re able to earn more and that companies are in a stronger position to earn more profits so that they can take more people on and can reinvest in their businesses. You don’t deal with an earnings problem by squeezing the tax lemon even harder and harder and harder. That just makes the problem worse which is what the Labor Party is proposing to do. They’re saying the issues in the Deloitte report are solved by putting a greater tax burden on the economy. Now, we don’t share that view.
We think that the way to go forward is to ensure that we relieve that tax pressure on companies and on individuals to ensure that they can earn more and do better in what is a very tough economy. To think that we have the luxury of whacking up taxes because the money will just keep pouring in and that people will keep earning is a nonsense and shows a fundamental lack of understanding about what is going on in both our domestic economy and the global economy. So Chris Richardson is right to highlight that the revenue challenge is all about the earnings equation. He's also right to point out that the movements in commodity prices don't provide a magic fix to this. While there have been improvements and, in fact, on all of the key commodities indicators that are present today, they are all better than what we had in the May Budget. I note Chris Bowen attacked me up hill and down dale over the election campaign and since then suggesting the assumptions that had been made in the Budget were naive and they were unrealistic and would collapse the Budget. I will leave him to explain his position today. I think it's a mug's game doing what he got himself into. Commodity prices move around, you need to look at them soberly and assume conservatively. That's what we have done and will continue to go into that. The MYEFO will be on December 19 and we will have the advantage of additional data before bringing that down which will give the full picture.
QUESTION:
It’s been forecasted that there will be a $24 billion Budget blowout in four years, do those figures seem right to you?
TREASURER:
That will all be made very clear on 19 December. Chris' work is very thorough, it always is, but he obviously doesn't have access to the data that's still to come. I am not going to be premature about these things. The midyear economic statement is simply that, it’s an update. It is not a mini budget, the Government is not having a mini budget, we never proposed to have a mini budget. We have a budget. That budget includes the savings and taxation measures that we put to the Parliament that we continue to ask the Parliament to pass.
The midyear update will update by definition all the parameters and where things are at and any new measures that are introduced are subject to the offset rules to ensure at a policy level that there is no negative impact on the overall Budget position. But the midyear update is simply that: to provide an update. We continue to pursue our plan to ensure that businesses are in a better position to give employees more hours and better wages going forward by enabling them to invest more. I make this other point too and Steven Koukoulas made this point last Friday, ‘the Kouk’ as he is known by his friends in the Labor Party. He made the point that with the Trump Administration also going down the path of company tax cuts and they announced those some ago, actually after our Budget, so this has always been our position. And that the May Government has continued on with the Cameron Government's view about tax cuts. His view is that the Labor position on company tax cuts could leave Australia’s economy stranded. This is a very telling statement by Stephen Koukoulas. He is basically saying that Labor's plan can leave the Australian economy stranded. Now this highlights the recklessness of Labor's approach. Higher taxes leaving businesses stranded and they won't even come at giving a business with less than 20 employees, with a turnover of $2.5 million the tax cut that they need to ensure they can continue to keep their head above water in what is a very tough economic climate.
QUESTION:
If there are further revenue write-downs and whatever the exact figure might be, there is a further delay to the return to surplus timeline, how are ratings agencies going to see that?
Are you concerned this builds the case for them to cut the AAA rating?
TREASURER:
Ratings agencies when I met with them in New York, S&Ps, the other ratings agencies as you’d know have confirmed Australia’s AAA rating. S&Ps were mindful of the sensitivity to further parameter variations but their key point has always been you have a plan, a fiscal trajectory to return the budget to balance, and for that to occur the Parliament needs to pass the savings. So I think these figures are another reminder to the Parliament, and to the Labor Party in particular, who oppose some $19 billion and more in spending savings, that these are important to pass. The corporate tax cut component over the Budget and forward estimates, the whole package, so from turnover zero all the way through, is around $4.9 billion. But they're blocking savings of around $19 billion. If they are so concerned like they say they are about the fiscal position of the Budget, well, pass the savings. At the last election, Labor said that they wanted to increase the deficit by $16.5 billion. Now, the ratings agencies would be very quick to pass judgement on that.
QUESTION:
Treasurer, the Grattan Institute has released a report today that says there is a billion dollars to be saved by cutting down on entitlements for older Australians. Will you be considering that?
TREASURER:
Already in the last two budgets we have introduced some very significant measures on retirement incomes. Firstly the pension eligibility changes that I took through as Social Services Minister. In this Budget we addressed the long overdue issue of dealing with superannuation tax concessions. I introduced those measures to the Parliament when we last met. They hopefully will get the support of the Parliament before we leave. My focus is on ensuring that the fiscal restraint that we have already put to the Parliament is passed. Other measures, the Grattan Institute have speculated on any number of different types of measures that can be considered and there is no shortage of advice or suggestions that are provided to the Government but our priority at the moment is there is already a fiscal consolidation plan before the Parliament. It's important the Parliament deals with that business and that business needs to be dealt with over the next fortnight and indeed in the autumn sittings of next year before we bring down the next Budget.
QUESTION:
On the company tax cuts, you’ve not put them to the Senate this year. They’re going to go to a vote, I presume, next year. You’ve mentioned Trump and the UK, are you suggesting that what’s happening in the States and Britain actually gives you an increased chance of getting those company tax cuts through the Senate next year? And a related question which is, there’s still this fundamental problem that you’d be increasing deficit by $48 billion over a decade by passing the company tax cuts and there’s a lot of cynicism out there that you’re actually giving up revenue when you most need it. What’s your response to that?
TREASURER:
First of all, the biggest savings to the Budget are actually achieved as I’ve just outlined on the savings measures that are before the Budget. The savings measures still outstanding are some four times what the cost to revenue of the corporate tax measures that we have before the Parliament. And as I said, the corporate tax measures – the Enterprise Tax Plan – is about giving businesses more room to move to give people more hours of work. That actually helps businesses and it helps people’s living standards and their weekly pay packet. I think that’s a priority. The Labor Party thinks refusing to get welfare spending under control is their priority. They want to keep all of the lack of targeting, and they want to keep the redundant measures that are still there and pursue a second tier type welfare measures and all these sorts of things. They think that that is more important than improving the wage earnings of Australians. That’s why we’re committed to the Enterprise Tax Plan. Now, as Steven Koukoulas said last week, the fact that the Trump administration is also going down the path of company tax cuts means that Australia runs the great risk of therefore being stranded. Whether that means that Parliament is more likely to pass these measures next year is up to them. But I certainly think it strengthens the case for it. So the Government is very happy to give the Parliament more time to contemplate this and to reflect on these things over the Christmas break and we would hope that they would support that plan. Labor has no alternative plan, let me stress.
QUESTION:
Would Nick Xenophon be swayed by Donald Trump though? Do you think that’s likely?
TREASURER:
That’s a matter for Nick Xenophon. What I hope he’s persuaded by, and what I hope all the crossbenchers are persuaded by, but what I particularly hoping the Labor Party will be persuaded by is their own support for these measures in the past. The Labor Party, Bill Shorten, the whole cast of Labor luminaries have always said that reducing that rate is good for the economy, it’s good for business, it’s good for jobs, it’s good for wages. Only now, out of cynical politics, do they refuse to match what they’ve always said by voting for these measures in the Parliament. I think that is a real commentary on the economic poverty of Labor economic policy. The absolute policy poverty of where the Labor Party has got to. They are now just a bunch of cynical populists jumping on whatever bandwagon comes next. That is a great risk to our economy. The Government holds to our line, we stay the course, we know what’s good for the economy and we’re going to continue to pursue those measures to ensure that people’s living standards can be protected, particularly in the middle income.
QUESTION:
Just on industrial relations, how are those two Bills going to impact on the Budget and if indeed they are, should they be the priority in these last two sitting weeks?
TREASURER:
The changes, particularly in the building and construction industry, will mean that Australia will be able to be more competitive when it comes to investment in this country. The fact that we have 30 per cent increases in building and construction costs because of the lawlessness in the building and construction industry and dealing with that in the very clear way that we intend to with these Bills will obviously be an attractor for investment so that can only be good for the Budget. Anything that increases investment in this country is good for wages, it’s good for profits, it’s good for government revenues and it’s good for ensuring that we can keep taxes as low as possible. That’s why these bills are so important. And you know what? It’s only fair that union officials running unions, looking after millions of dollars of their own members’ money, should be at least subject to the same standards of propriety and governance that company directors are. Why on earth does Labor think that unions should be held to a lower standard for looking after their members’ money than companies should be held to, to look after the interests of either their shareholders or indeed their employees? It’s a woeful and shocking double standard that once again demonstrates the weakness of Bill Shorten when it comes to dealing with economic policy. Thank you.