BARRIE CASSIDY:
We are joined by Scott Morrison, the Treasurer, who joins us from Sydney.
TREASURER:
G’day Barrie.
CASSIDY:
Welcome. Do you see the cuts, up to $50 million turnover, do you see that as the first step in a 10-year plan or are you happy for it to stand alone as a 3-year deal?
TREASURER:
It is stage one of the plan. That is what the explanatory memorandum said. We are pleased to see this get out there and get passed. This delivers in full all the tax cuts we said we would be delivering in this term of Parliament, that would actually hit the ground. That's some $5.2 billion over the budget and forward estimates. That delivers on what was outlined in last year's budget, for the budget and forward estimates. This is a very good day and outcome for Australian small and medium-sized businesses, some 3.2 million and, importantly, 6.5 million Australian employees, that's half the labour force, is covered by these changes. That is a significant, a significant, delivery which many thought wouldn't occur and had been saying, particularly the Labor Party all week that it couldn't be done. Well, it can be done. That comes on the back of so many other things we have been able to deliver since the Budget was handed down since the election. Almost two-thirds of our budget improvement measures have also been implemented since the last election.
CASSIDY:
But you say half the labour force, they are not getting the tax cuts.
TREASURER:
That's what the purpose of these cuts for small and medium-sized companies are. So the businesses can invest more. That's how you grow wages. That's how it works.
CASSIDY:
Does that grow wages or just guarantee jobs? Does it actually grow wages?
TREASURER:
It does both and that's what the Labor Party's work showed when they were in government, what our work shows now we're in government. If you give businesses the opportunity to invest back in their business, then that leads to growth which leads to secure jobs and higher wages. I think that is - this is why we do these things. I want to see Australians earn more. I want to see businesses earn more. I want to see the people who work for those businesses get a great outcome in their own pay packets from that.
CASSIDY:
There will be no more negotiations now between now and the next election but in the run-up to the next election, you will be going flat out in explaining how you'll deliver the rest of the package?
TREASURER:
We will present these, as the Prime Minister said on Friday, we will present the further phase of our Enterprise Tax Plan to the Senate when we are in a position to believe we can pass that. We haven't moved away from this at all. We remain absolutely committed to this plan because this plan is what is going to attract investment. We have got countries all round the world, particularly the United States but the United Kingdom has already moved, the French Government is already moving, who are taking down their company tax rates because they know that capital moves and where capital moves, that's where the jobs go so we need to ensure our tax system is competitive to keep the jobs, to keep the wages and keep the growth.
CASSIDY:
You say you'll present it when you think you'll get it through, does that mean beyond the next election, you’ll have a look at the Senate and make a judgement then?
TREASURER:
I was encouraged by the progress we were able to make this week. If the Senate is in the position to look at this before the next election, we will be more than happy to bring those things forward.
CASSIDY:
Is that possible?
TREASURER:
People were saying it wasn't possible to get two-thirds of your budget improvement measures through this Senate, since the last election. Everyone said that couldn't be done, bringing on Registered Organisations, bringing the rule of law to construction industry, we have done all that. We brought in the multinational tax laws which is bringing in $2 billion in extra money being clawed back from multinationals. That's happening. The diverted profits tax, that's happening. We got our personal income tax cuts through the Parliament. This has all happened and we are delivering in spades.
CASSIDY:
But what about this particular deal encourages you to think you could go another step further before the next election?
TREASURER:
When we were starting the discussions with the crossbench last year, they weren't prepared to go any further than 10 and we got to 50 in the course of the week. I'm always an optimist, particularly when it comes to the Australian economy.
CASSIDY:
Then you'd have to make more deals like you have just done with Nick Xenophon.
TREASURER:
It is a pragmatic Parliament. We have demonstrated a lot of capability to get things done in this Parliament.
CASSIDY:
The one-off payments you have given into Nick Xenophon on to help pensioners with the rising cost of power, are you a fan of those kind of one-off payments?
TREASURER:
This is the outcome of the arrangement we have reached in good faith and we will deliver on that.
CASSIDY:
It is but are you a fan of them?
TREASURER:
I'm a fan of getting things achieved.
CASSIDY:
Isn’t the problem is you do it this time, then the other Senators, especially now they've heard you say this morning you'd like to get moving on this as soon as possible, they'll come to you with demands as well. It is almost a form of political blackmail.
TREASURER:
You have been around politics for a very long time, you have worked for governments in the past, you know this is not a new dimension to Australian politics. Governments are elected on the basis of getting things done. That's exactly what we're doing.
CASSIDY:
In this case, the cost is $260 million which the Prime Minister says is "very affordable". How can anything be very affordable when you have a budget deficit in the 30 plus billions?
TREASURER:
That's the task of the Treasurer to ensure it is accommodated in the Budget. That's exactly what we will be doing.
CASSIDY:
That's the reality, it will be 30 plus billions?
TREASURER:
It is a one-off payment, its $260 million. That will be taken fully into the budget.
CASSIDY:
How can that be very affordable in that context?
TREASURER:
We will be making sure that it is because what we do on our side of politics is we are always ensuring we are getting expenditure under control. I'm pleased we have been able to get two-thirds of our budget improvement measures through. I'm very pleased we have done that. What the reality here is Labor now has a very big hole in their own budget. What Labor now has to address is there is $4.3 billion that they counted on having as being able to spend by opposing these tax cuts for small and medium-sized businesses. They are now $4.3 billion worse off over the budget and forward estimates and some over $20 billion worse off over the medium term. Bill Shorten now needs to decide whether he is going to increase taxes on small and medium-sized businesses or stand by his promises for higher spending. They went to the last election with a worse deficit of $16.5 billion. That figure now, after the decision this week, is more than $20 billion over the budget and forward estimates. That's a very big hole that Chris Bowen needs to explain to the Australian people, and Bill Shorten needs to explain, how he is going to fill it or will he walk away from the commitments he made earlier, whether it is on schools or other things, like he backflipped on the Schoolkids Bonus and the pension assets test and all of these things which he did before the last election?
CASSIDY:
That would be an even bigger jam if you cut your losses and say you'd just go with the 3-year plan and abandon the rest. That would be many billions of dollars more.
TREASURER:
Well it would. We remain committed to the plan because we have a plan for jobs and growing the economy. They don’t have a plan.
CASSIDY:
Can we be clear on the growth dividend from this? It was 1 per cent when it is a 10-year plan, it is 3-years now. Half a plan is that half a per cent growth dividend?
TREASURER:
We are committed to the full plan. So we are committed to getting the full dividend of the full plan.
CASSIDY:
What will the growth dividend be over three years?
TREASURER:
The growth dividend developed by Treasury, which is very similar to the same models Labor ran in government, gives us that one per cent uplift in GDP after the whole plan is implemented and that is more than a 2.5 per cent increase in business investment. And for small and medium-sized businesses - put yourselves in the shoes of a company like Zokoko, a chocolatier out in Penrith, a small business, between $2 million and $10 million. They are not only getting a 27.5 per cent tax cut, they are getting access to pool depreciation, the instant asset write-off, they can do their GST on a cash basis. That means a lot to a company like that. They can invest, look at new markets, look at investing more and taking more people on. That's what this means on the ground for a small and medium-sized business in Penrith, in my home city.
CASSIDY:
But one per cent growth over ten years. They are not going to get too excited are they?
TREASURER:
I don't take growth for granted. I work hard every day to get every inch of growth out of the Australian economy because that growth secures the jobs and delivers the wage increases Australians need and I want them to get.
CASSIDY:
This is where people queried, where is the evidence it delivers wage increase? Wages have been flat for a long time.
TREASURER:
The evidence is the same evidence the Labor Party put forward for these changes when they promoted them.
CASSIDY:
They are no more likely to believe the Labor Party than they believe you on this. They don't believe governments.
TREASURER:
That's why I drew you to a practical example. The econometric models show one per cent growth as a result of reducing it to 25 per cent over the next 10 years for all businesses, 2.6 per cent uplift in business investment. That's what the econometric models show. Go to the small business, ask them and say you have a 2.5 per cent cut on your taxes, getting the instant asset write off for expenditure up to $20,000, pool depreciation provisions across all your capital investment, you are able to manage your cash flow better with your GST. What are you going to do? What I know about small business is this: they invest in their employees first, they pay their employees first, they pay their creditors, invest in their business and you know who they pay last? They pay themselves last. That's one of the reasons why the Australian economy has been so resilient and people have stayed in work.
CASSIDY:
Can we throw forward now to the Budget? Where will the emphasis be? In a nutshell, what's the strategy?
TREASURER:
Goal one remains growth because unless you are driving economic growth in what is an improving world environment, you can't secure the jobs and grow the wages. That's point No.1. Point No.2 is the government needs to continue to live within its means so we can affordably deliver the services that Australians rely on, whether it is Medicare, schools or hospitals or Social Security system and making sure that is as tight and focused as possible to tread as lightly on taxpayers as we need to. It is all about growth to support the jobs and higher wages we want Australians to have and it is about continuing on the disciplined path of managing the Budget - it is currently projected to be in balance in 20-21, and that remains a difficult challenge...
CASSIDY:
You will recommit to that?
TREASURER:
It is a projection. I have always been very careful with my language on this. I haven't gone down the Wayne Swan path promising budget surpluses that are never delivered. I have said we will continue to keep expenditure under control, the budget is projected to return to balance in 20-21, we were able to maintain that in the mid-year statement at the end of December, we were able to resecure the AAA credit rating from all three ratings agencies in December and we remain absolutely focused. The Labor Party has worked against us on every occasion. They have rejected savings measures, they left a big black hole in funding the NDIS which we have to address. These are important things Australians rely on. I'm very focused on doing that.
CASSIDY:
On the Labor Party, they never came up with a $36 billion budget deficit, that seems to be where you'll be.
TREASURER:
Labor's deficit would be $20 billion higher over the budget and forward estimates. Labor can't lecture the Government. They want a bigger budget deficit and they vote against the savings which will actually get the budget deficit down. We are going to have to address that and we will. The other key area about the budget is it is keeping the pressure down on the cost of living. Whether that's on energy or housing affordability issues, particularly in our major capital cities in Sydney and Melbourne but I'd stress more broadly there are 30 per cent of people in this country who live in a house or a flat or apartment that is rented. Housing affordability is as much an issue for people who rent as it is for people who are seeking to buy and particularly for those on very low incomes where we have been seeing people in greater rental stress on low incomes and that has my attention too.
CASSIDY:
So you will be dealing with the equity issue as well. You have made that clear. Can you do all of this simply by cutting spending? Surely you'll have to raise taxes as well?
TREASURER:
That will all be addressed in the Budget. You wouldn't expect me to speculate on measures as you have invited me to do at this point. It is not that far to the Budget but what I do know is we have to keep the economy growing. When I returned from the G20 recently, I was encouraged because for the first time in a long time, the world's Finance Ministers had gathered together and for the first time we were talking about how things were improving. That was true in Brazil, true in Spain, certainly true in the United States, and even in Europe more broadly in the UK after Brexit, there was a more positive mood. I'm not going to overstate it but with the economy starting to grow globally, our trade deals, our investments in defence, our investments in science and research, our investments in infrastructure and, of course, our investments in lowering taxes for businesses so they can invest more and employ more - that's our plan. Labor doesn't have a plan.
CASSIDY:
But clearly it does seem fairly obvious you will have to raise taxes in some areas in the budget.
TREASURER:
What is obvious we have to grow the economy, continue to consolidate the Budget, deliver the services Australians rely on and put downward pressure on the cost of living for Australian families and businesses.
CASSIDY:
Thanks for giving us your time this morning.
TREASURER:
Thanks, Barrie, good to be with you.