PETER SWITZER:
Ok, it’s one thing to put together a Budget. It’s another thing to get it actually passed through this wild and wacky Senate we have nowadays. So that I explored with the Treasurer, Scott Morrison, earlier this evening.
TREASURER:
I’m very proud of what we’ve done in this Budget because it does a number of things. First of all, it’s a reality Budget. I mean, you’ve got to deal with what’s in front of you. You’ve got to deal with the situation, you have to address – you know, Budgets can’t be theoretical. They’ve got to deal with the practical world and that’s what this Budget does both with the Senate, the political environment we’re dealing with, but also the very practical necessity to ensure the Budget continues to come back to balance in accordance with the timetable we projected and we achieve that in an even better way than we did in December. But it also guarantees essential services, it also puts downward pressure on that cost of living and it also does things to support growth – particularly our infrastructure investment which comes on the back of the Enterprise Tax Plan which we announced last year.
SWITZER:
Ok, well, yesterday we didn’t know what S&P was thinking about your Budget, but have you have you had any contact from them? Are they going to give you the thumbs up?
TREASURER:
Well, they haven’t made any further statements today, but if you look around what basically all the major economists from the various banks and others are saying is that they can’t see any reason for them to take a different view. You’ll remember, of course, back in December they all reaffirmed the AAA rating and amongst the three agencies, and our position today is stronger than it was then. Both in, I think, the reversal of those unlegislated measures goes to the credibility of the Budget, the projection of the balance coming in in 2020-21 and, of course, you know the conservative position we’ve taken on commodities and things like that, demonstrate this is a credible and honest set of numbers.
SWITZER:
Ok, well, when Joe Hockey had trouble with his first Budget, I interviewed Peter Costello who said that if he had been Joe he would have walked down the corridors of Parliament and asked Ricky Muir to go for a drive to get to know him. Have you been out driving and partying with Jacqui Lambie, Derryn Hinch, Pauline Hanson, the lot? Are they going to support you in this Budget?
TREASURER:
We’ll see over the coming months. I don’t want to pre-empt – already Nick Xenophon has indicated his interest and support for some measures. Particularly, on supporting the National Disability Insurance Scheme and making sure that’s fully funded and it’s something that’s pretty close to my heart and we all have an association, I think, with people who are disabled for whatever reason. And I think it’s important that we give them the certainty of fully funding that important scheme and that we don’t sort of continue an unnecessary political argument about this – we can put this to rest. We tried to get savings through to pay for it and the Labor party and the Senate said no. So we’ve decided to try and meet them in the middle and invite them to say, “Look, can we agree on this so we can now focus on making sure the NDIS is going to deliver what it needs to and that it is well run and that the Australians?” Which is all of us who are going to pay for it, are getting the real value for money.
SWITZER:
Well, you know, Scott, I reckon you once were the pinup boy for all self-managed super fund retirees, but with some of the changes from the last Budget and also picking on the banks with the bank levy, some of them may well be thinking you’re not as popular as you used to be. What do you have to say about the bank levy? Because a lot of people are saying you know, well – are you doing this just to please the Labor Party who want a Royal Commission of inquiry into the banks?
TREASURER:
No, the problem with when people look at these things, Peter, is they all they can think about is politics and personalities and that’s all just bunkum. The reason we’ve done this is we’ve obviously had some challenges in this Budget when you were reversing out what in net terms was $13.5 billion in measures that we’d not been able to legislate through the Senate. So you’ve got to deal with that and in part we’ve dealt with that by the structural change we’ve made with the levy on the banks. It’s a very different calibrated attack to the one that had been previously introduced which was basically a tax on all banks on their deposits, we’re not doing that. What we’re doing is a levy on the liabilities at six basis points across liabilities, which doesn’t include the FCS guaranteed deposits, which is deposits up to $250,000. It doesn’t include that tier one capital which is therefore unquestionably strong. It doesn’t include the shareholders capital. So it doesn’t include a lot of those things for good reason, but what it does include is the rest and this is a $1.5 billion revenue raiser each year out of a profit pool of over $30 billion. And the other point I’d make on that is it’s consistent with the approach that so many other jurisdictions in developed countries do as well. You know that the major banks, the top four, have an up to – and Standard and Poor’s says – about a 20 basis point advantage on the rest of the field because of what is effectively an implicit guarantee. Now, we’re not taxing that, but that’s just to make the point that they have an advantaged position as cornerstone banks in our financial system. That’s important, but at the same time it means they’re in a position, I think, to do what they do in so many other countries.
SWITZER:
Ok, so, but I guess their argument also is that they are quality acts and the quality of their performance was such that when you did add in the Government’s support during the GFC, it kind of kept Australia out of recession didn’t it? So like it was a part role of Government, a part role of the banks, they say, “We actually bring a lot to the table.” So my next question really is, is a decision to hit the banks primarily because you can’t get a GST in? Which is higher and broader which you’d really like to do if the Senate would give you a thumbs up.
TREASURER:
It’s a practical measure, and it’s a measure which is not uncommon. I mean, for a long time we haven’t had a measure like this. And I don’t take issue with anything you said about the role of the banks during the GFC, and I think you’re right, their management and their cool management during that period was important. But so was the cool management of the Reserve Bank, so important also was the cool management of Treasurer Costello’s reforms prior to the GFC which really set up the regulatory environment, which I think did protect Australia during that financial crisis. But yes, I want them to continue to be unquestionably strong, absolutely, but I also want them to be unquestionably fair and I want the banking system to be unquestionably competitive and I think these are other important elements of the system that our banking and financial sector needs.
SWITZER:
I guess you’ve heard a question like if someone downsizes and takes the $300,000 and puts it in their super, they could end up losing their pension? Was there any ever questioning of whether you give some exemptions around some people who take the downsizing option and then would lose their pension?
TREASURER:
Well, we decided we could afford to do it to enable the contributions to go back into superannuation but it is not an affordable measure to do it on pension.
SWITZER:
Ok.
TREASURER:
So, it’s just basically unaffordable.
SWITZER:
Alright, so putting it all together, what’s the likelihood of the Senate accepting most of this Budget?
TREASURER:
Well, I’ll be able to answer that question a lot better in a few months’ time, but I think the measures that were put forward on this occasion are entirely reasonable, and certainly there hasn’t been, particularly on the big fiscal measures, the type of reaction we’ve seen to previous Budgets. I think we’re very much in the zone to have constructive discussions and we’ve listened and learned a lot, Pete, over the last few years. Perhaps taking Peter’s advice that hasn’t necessarily evolved to drive with me and Ricky Muir but when I was in a different portfolio some years ago I spent a lot of time with Ricky Muir and he supported my changes in immigration. So you know we’re no strangers to getting things through the Senate, it’s difficult but it’s not always impossible. I mean, we’ve got $25 billion in Budget improvement measures through since the last election, now people didn’t think we could achieve that. Just this last week we got the Youth PaTH initiative through which is a key passion of mine getting young unemployed people into work. I announced that at last year’s Budget, that got through the Senate this week and I was very pleased to see that.
SWITZER:
Ok, well, let me just give you one kick right in front of the post, mate. You know you talked about your $75 billion worth of infrastructure spend, I guess one thing we have to add on also is there will be a lot of private sector participation will actually add a lot more to the potential injection to GDP, which you didn’t seem to crow about in your Treasurer’s Speech.
TREASURER:
Well, I understated, Peter. You know I’m following from my former tutors and earlier in my life, I’ve continued their modest tone. But you’re right about that, I mean, take the Inland Rail for example. We’ve got a significant capital injection going into that project but equally there is the opportunity for private sector partnership and participation along various sections of the route. And you’re absolutely right. The way that Anthony Albanese goes on you’d think he’d thought he’d laid every single brick in the country over the last 20 years. The Commonwealth Government aren’t the biggest investors in this area but we’re certainly investing a lot more than the previous Government. I mean, we’re spending $75 billion over the next ten years so an average of about $7.5 billion there or thereabouts obviously, but under the previous Government, it was well below that at around six. And you would have also noted that when I spoke the Australian Business Economists, and I’m being very clear that we’re trying to be more clever in how we best use debt, particularly for financing infrastructure, with the low rate environment we’ve currently got to best advantage these projects. And something Phil Lowe’s been saying for some time, that you know this is an opportunity that we can leverage at this point in the cycle. And so our debt from 2018-19, we will no longer as a country be borrowing, new borrowing, new Commonwealth Government security issuances to fund everyday expenditure like pensions and things like that. Now, it’s been a long time since there was a Treasurer who could say that and the last one who could was Peter.
SWITZER:
Of course. That was the Treasurer Scott Morrison and it’s going to be very interesting to see how much of this Budget goes through the Senate over the next few months.