KIM LANDERS:
Treasurer, good morning.
TREASURER:
Good morning Kim.
LANDERS:
How is the global share market volatility and slowing Chinese economic growth affecting your decisions as you prepare that Budget?
TREASURER:
Well let’s talk about China first. We have 6.9 per cent growth in China. What is interesting about that is that is 50 per cent more in terms of purchasing power coming out of the Chinese economy than occurred in 2010 when it was growing at 10 per cent. So I think we need to get the China story in a bit of perspective. The other thing about what is happening in China is its services are now more than half of its economy. Something very similar is happening in our economy is we are transitioning through the morning boom, the construction phrase of that to a much more services-led, more diversified economy. Now what we are seeing I think is a synchronisation between these two as China changes we are changing. But the key to all of this we we've got to keep changing and Australians are already out there making those changes, to diversify our economy, changing their skills, looking to the future. The way forward for the Australian economy is very much to do that. You can’t look back, you have got to look forward and that is why you have got to address structural changes, things like making our tax system more growth friendly.
LANDERS:
We will get to tax in a moment, but just one other think on the broader economy unlike the US Federal Reserve and the European Central Bank, Australia's Reserve Bank still has a bit of wriggle room to cut interest rates. Should it?
TREASURER:
That's a matter for the Reserve Bank, but when you look at the volatility in the markets at the moment and that there has been a lot of volatility, we all know that, Australians understand that, and that's particularly concerning for independent retirees who are most impacted by these changes, but when you look through all the churn and all of that and you look to the real economy, I think that's why I think the Reserve Bank has had a much more positive view about Australia. More than 300,000 jobs created last year, good, strong business conditions, retail sales up, motor vehicle sales up, so the fundamentals of the Australian economy and what's driving us and the diversification of it is good, but, but, you just can't rely on that continuing to happen without continuing to make the changes you need to make to ensure our economy is growing jobs in the future.
LANDERS:
Well, talking about change and you mentioned tax, how much longer do we have to wait before we see the tax white paper?
TREASURER:
All of these things will be before the Australian people before an election and there is a Budget coming up later in the year.
LANDERS:
How long before an election?
TREASURER:
We are not rushing these things. We've had hundreds and hundreds of submissions to the tax white paper process. The Re:Think paper was issued last year and we are working through those. We are working with the stakeholders and with the state and territory governments. There are many tracks we are working down here and there are a lot of components of this package, whether its superannuation or the tax mix or things like this but the fundamental point is this, it's actually about growth and jobs. That's why you do this. The Labor Party is all tearing itself to pieces over this at the moment. Jay Weatherill making a bit of sense and he is a Premier who has to run a state and he is addressing growth challenges in his own state.
LANDERS:
But this is a very complex sort issue and if you are going to explain it to the Australian voters, you are not going to drop the tax package in the midst of an election campaign, are you?
TREASURER:
The election is at the other end of this year, so there is a long time this year for us to move through a series of issues in the tax area, but what's important is why you need to do this and why you need to do this is that the Australian economy needs to grow stronger than it is now. Our growth is improving and that's encouraging, it is very encouraging, particularly in the volatile environment we have at the moment. That's what we're focused on right now and elections will happen later in the year and right now Australians expect us to focus exactly on what we are focusing on.
LANDERS:
How confident are you of reaching a consensus is on tax reform when you meet with state treasurers’ next month?
TREASURER:
I'm always confident that state treasurers will come around the table and be focused on how to grow the Australia economy in their own state. We might have different views about how you achieved that but I think in all the meetings I've had to date with the treasurers that has been one area of consensus. So look we will just continue going down that process, I am not going to make predictions about it I respect the view of the other states but what we are seeing is quite a change. A few years ago WA was powering the Australian economy. Today that is being powered by NSW in particular and there are changes happening in the resource states like Queensland and WA, so a lot of change taking place, but one thing I know that can support growth right across the country is a tax system where personal income taxes don't punish people for working more, saving more and investing more.
LANDERS:
You've said this week that you favour a tax system that treads more softly on people who are working, saving and investing.
TREASURER:
Yes.
LANDERS:
Would a GST increase do that?
TREASURER:
Well, these are matters that are part of the public debate and a tax mix which is one that tries to seeks to reduce personal income tax burdens and hopefully potentially reduce corporate tax burdens, is one that can support growth in the economy. If you look at what is happening around the world and the way our tax system is weighted, it is weighted very, very heavily on personal income taxes and on company taxes and that's holding us back.
LANDERS: But how long can all this speculation about a GST go on for?
TREASURER:
Well the media will speculate about things. The government is being very clear about what our priorities are and our priority is growth and jobs.
LANDERS:
But you're not clear about whether or not you favour a GST increase?
TREASURER:
Well, others are speculating on GST, states have the raised GST. What I'm raising is personal income taxes and I think personal income taxes are too high and when you have the average wage earner going on the second, next tax bracket next financial year I don’t think that is a sustainable position.
LANDERS:
So how much do you want to reduce them by?
TREASURER:
Well these are the issues we are working on and you have got to find a way to do it. The only people at the moment in politics trying to find ways to reduce personal income tax, and if it is possible company tax, is the government.
LANDERS:
On another matter, Treasurer you are a senior Liberal Party in NSW, what is it going to take to end all this preselection infighting between the moderates and the conservatives within the party?
TREASURER:
Well I think frankly all of that is over-stated. Certainly the events of last year caused consternation, but the party is moving on. What we are seeing at the moment is the normal preselection process that occurs at the other end of redistribution.
LANDERS:
So you support Bronwyn Bishop, Philip Ruddock, Bill Heffernan, for example, for them to be preselected to run again?
TREASURER:
Well, they are matters for them to decide. The only thing I think – I have always had the rule that I don’t interfere in other people’s preselections and they don’t interfere in mine.
LANDERS:
You have nothing to say about this?
TREASURER:
I have said very strong things about Craig Kelly, he is my neighbour down there in the Shire, but again that's a matter for the local selectors in the Hughes conference to make their decision. We are a democratic party; people will make their own decisions in these areas and that is the way it should be. I don't think these events should be misinterpreted; they are the normal democratic process of pre-selections. Here is a big shock, in the Liberal Party we have pre-selections where people turn up and vote for candidates. That is not anything irregular about that. It is quite normal and the redistribution meant that these issues had to be dealt with quite late in the electoral cycle, so I would - I think these things have been quite overstated and the party will just get on with its process.
LANDERS:
On another matter then, will changes to foreign investment legislation be in place to ensure that the sale of the Port of Melbourne is properly scrutinised by the Foreign Investment Review Board?
TREASURER:
It's not clear at what point they will finish their legislative process and what their timetable is around that issue but we are moving quite quickly on the changes I flagged last year which would see that critical infrastructure would become within the purview of FIRB. I wrote to all the state and territory governments about that and had favourable responses from all of them; we discussed it at our State and Territory treasurers meeting. So that process is moving steadily along.
LANDERS:
And a final question, an independent report has found that there was no evidence nor reliable information to justify the removal of Save the Children staff from Nauru. You had said at the time when you were Immigration Minister that they had been allegedly coaching asylum seekers about self-harm. Now the Human Rights Commissioner Tim Wilson says the Government should apologise to those staff. Would you apologise?
TREASURER:
They are matters for the Immigration Minister. The independent report you refer to was the independent report I commissioned based on allegations that were put before me, not just on that issue but on a whole range of other issues.
LANDERS:
So the current Immigration Minister should apologise?
TREASURER:
I commissioned an independent report. I made no conclusion about the allegations that were made about those issues, whether it was Save the Children or anyone else, and any suggestion that I made a conclusion about that at the time is simply false or maybe wishful memory by some. But what has happened is the independent report has been undertaken. I think the report speaks for itself and those are matters for the Immigration Minister because I'm focused on the economy.
LANDERS:
All right. Treasurer, thank you very much for speaking to AM.
TREASURER:
Thanks a lot.