TREASURER:
G’day, Graham, good to be with you.
GRAHAM RICHARDSON:
I’m very glad to hear that, I haven’t talked to you for quite some time. Now, in a week, we haven’t had a lot of good Government news. You at least have got a big smile on your face, those National Accounts figures the other day were pretty good, weren’t they?
TREASURER:
They were a good set of figures. Very good set of figures and I think there’s a lot of catch up from those figures from the September quarter too. When we add that negative quarter of September, I think that took a lot of people by surprise. But no one, I think, genuinely thought that the December quarter would be a follow up negative. But it really has roared back in that December quarter and there are some really good figures in there, particularly on business investment. That is the first time we’ve seen new business investment go up in more than 12 quarters so that was very good and there were certainly some good prices for our exports, combined with higher volumes, really did lift those company profits – particularly in the mining and resources sector which got the lion’s share of that.
RICHARDSON:
I want to get into those profits in a moment but just to follow on with what you’re saying there with business investment, it’s very hard for small business to get loans at the moment. Some of the major banks are using APRA as an excuse saying that the prudential requirements are now too onerous and are just cutting out small business loans. What can we do about that?
TREASURER:
One of the areas where we can promote greater competition is in this whole area which is called ‘financial technology’ – ‘FinTech’ – and we’re seeing a lot of smaller operators coming in and actually providing these different types of loans in the small business sector. We’re certainly seeing it overseas and it’s an area that I’ve been really trying to encourage and in the United Kingdom they’ve been doing it. We’ve introduced some deregulation environments where some of these products and ways of providing lending to small business can get up and going. But you’re right about small business. I mean, I was at a small business today, Graham, and it’s called ‘Aerofloat’ – it’s in my electorate down in the Shire. And they got a commercialisation grant from the Government about 18 months ago, and they’ve developed this new system which is a water treatment system. They’ve now got contracts in dairy areas, one in Narrabri actually that’s on a different property, and they’ve just scored a big contract up in Indonesia. So they’ve gone from a $500,000 business to more than a $2 million business in the space of 18 months and that’s, I think, a lot of the story we’re actually seeing in the economy. But you’re right, they’ve got to get access to the finance. That’s why we’re putting a lot of pressure on the banks.
RICHARDSON:
You’re putting pressure on the banks to lend some money but they keep saying that APRA’s got pressure on them with all these prudential requirements and how much they’ve got to keep in reserves, it makes that too difficult. How do we sort out APRA and the banks?
TREASURER:
Well, I don’t buy that. I don’t buy that. I mean, the banks know that they can make these loans and similarly there’s a broader banking sector which sits in the second tier, places like Bendigo, IMB, these types of banks. The bank loaning to business sector has been very competitive, particularly over the last 12 to 18 months and what we’re keen to see, not only these smaller businesses like the one I just mentioned, but others which are starting up, with introducing special tax arrangements on the venture capital side, start-ups – that’s critically important for some of these really small businesses that are getting good ideas and just when they need that support is when we’re trying to [inaudible] the tax arrangements so they can get going. That was in the innovation statement that we released in November of 2015.
RICHARDSON:
I’m sure it was but also if you go on from there, you mentioned this profits of the companies and isn’t it pretty hard, no matter how silver-tongued you may fancy yourself, how do you sell company tax cuts at a time of record company profits when you’ve earnt five years of either static or negative growth in wages?
TREASURER:
Well, these are the facts; for the 12 quarters prior to this latest one on the national accounts, so for three years, the average growth in company profits was negative, it was 0.2 per cent negative for those three years. Compensation of employees, so for the national accounts, the compensation of employees, which is the wages figure, that actually increased on average by 0.7 per cent. So over three years, we had company profits going negative on average and we had compensation of employees very modest, I guarantee you that, but that was positive. So, a lot of small and medium sized businesses have been sticking their hand in their own pocket to keep these businesses going, keep their employees there and even to achieve the very modest wage gains. But I’ve been saying for ages on your program and others, that our biggest challenge is to help Australians earn more, working Australians earn more, businesses earn more, I don’t think ‘profits’ is a dirty word, I think it is with the Labor Party these days…
RICHARDSON:
I don’t think it is either but what about obscene profits? The trouble with the argument is when the banks make as much as they are and perform as miserably as they do, that upsets virtually everybody and all the punters look at it and say, ‘Well, why give them a present?’
TREASURER:
Because at the end of the day, if businesses are investing more, people’s wages are going to be better and businesses are going to grow. Let’s look at what the plan is, the plan starts with businesses with a turnover of $10 million and less, like the business I was at today which has doubled their employment in the last 18 months. They’re the ones who’ll get the tax cut this year first and as it’s been defined as a small business with a turnover up to $10 million, they will get the other small business tax concessions. Then it goes to $25 million, then to $50 million, and at the end of 10 years, that’s when the larger businesses start to benefit and the reason we did it like that is if you’re a larger business, you’re looking 10 years down the track on a lot of these big investments. But if you’re a small business, you’re looking right now and so we’ve structured it right. Even the French Socialist Government are doing this, Graham, and that is apparently too right-wing for Chris Bowen and Bill Shorten. That’s the modern Labor Party.
RICHARDSON:
Look, I’m being told I have to wrap this because there’s somebody else coming into the studio. I’m terribly sorry, we’ll have to do this again because I’m about a third of the way through so thanks for your time, Scott. I apologise for the delay today but for those of you who don’t live in Sydney, it’s been pouring rain and it’s taken a long time for me to get to the station. We’ll talk to you soon.
TREASURER:
Not a problem, Graham.
RICHARDSON:
Thank you very much.
TREASURER:
Good to be with you, mate, and good to see you looking well.