TREASURER:
Good afternoon everyone.
Tonight’s Budget is going to make the right choices to secure the better days that are ahead. As we’ve talked to Australians and listened to Australians over the past 12 months in particular, as we have observed what’s been happening around the world with economies both near and far, what we’ve observed is that the Australian economy has done extraordinarily well against its competitors.
As I said this morning, not all Australians have shared in that growth and I certainly don’t believe that their personal experience reflects that growth. It is very true that in many parts of the country the impacts of globalisation, technological change have meant quite serious impacts on local regional economies and on jobs and on livelihoods. And as we frame this Budget, those Australians, as well as those who felt that they might be more ahead by now, they’ve been very much on our mind, because you know when wages growth is slow, when you haven’t had a decent pay rise for a while, you’re worried about your job, then no amount of the Treasurer telling you that we’ve been growing at the top of the advanced economy pack is going to alleviate that pain or that uncertainty.
What they expect of Mathias and I and the Prime Minister is to make decisions that are going to give them confidence about what’s ahead. That we’re actually going to focus on the growth that is necessary to support their job and their wages, that we’re going to focus on the services that they rely on and more acutely so because of the pressures that are on them. That we’re going to do what we can as a Government to put downward pressure on the rising cost of living. And as you know in this room, we must live within our means as a Government and ensure the integrity of the nation’s finances to support all this. Now, there difficult tasks to reconcile but it is our job as a Government elected by the Australian people last year to do that and to get on and make the decisions that you have to make. Not all of those decisions are going to be ones that you necessarily would have had as your first preference, but you also have to work practically with the political environment that you’re facing to get results. Australian people don’t give you a leave pass because you can’t get things through or had difficulties in the Senate. They still want their services, they still want downward pressure on cost of living, they still want the Budget to return to balance and that’s our job, and they elect us to do that job. And what we’ve done as a Government tonight is I think displayed a practical, reasonable and mature judgment to ensure that we can address these tasks.
Now I’ll have more to say about that in the speech tonight which you’ve read, which talks about those issues. But what I’m going to do now, just as quickly as I can is to run you through some of the numbers – they’re important.
First of all, after securing some $25 billion in Budget improvements since the last election, which many in this room would not have expected we would have achieved, but we did, there still remain measures that were unlegislated. We had said going into MYEFO that we’d made great progress and the ratings agencies acknowledge that with confirmation of the AAA rating in December. And we sought to make further progress this year and we made some - and we made some – but I said earlier this year that when the Parliament rose we would then have to assess how we went forward with those measures and we’ve reversed our net terms some $13.5 billion worth of those measures from the 2014-15 and 2015-16 Budgets. That’s why this Budget is an honest document because it has drawn a line and reset on the basis of what we believe to be credibly maintained on the books having resourced at every single opportunity to ensure that we could achieve those savings measures. But notwithstanding the reset, what you can see is that we do reach on the underlying cash balance a $7.4 billion projected surplus in 2021. Now, that’s up from the $1 billion that we anticipated back in December of this year. And you can see we have come reasonably close in the previous year which is a welcome position for us to be in.
On top of that, you can see that over the medium term that once we achieve balance in 2021 we expect to retain that, which is the blue line which is slightly above the MYEFO line that you saw earlier in December. So, an improvement on what we announced in December and that balance runs out over the medium term. Now you might ask, ‘what’s that dotted line above that?’ What that dotted line is is if you don’t have a tax cap of 23.9 per cent. Now, at the last election comparisons were made between the Opposition’s surplus line, and it didn’t include a tax cap. If you don’t have a tax cap constrained to 23.9 per cent that’s where the balance goes to. If you actually have balance cap of 23.9 per cent, that’s what the balance looks like, and over the Budget and forward estimates the tax to GDP is 23.7 in 2020-21.
Now on top of that, what that all means is that we’ve got a fiscal consolidation rate of 0.6 per cent of GDP per year and an improvement since MYEFO of $11.5 billion on the bottom line. In 2017-18 the deficit as measured by the underlying cash balance will be $29.4 billion, that’s just under $30 billion or 1.6 per cent of GDP. That forecast deficit for next year as a share of the economy is almost half what it was just two years ago in 2015-16, and if you go back to 2013-14, it was three per cent of GDP.
Now some have mentioned as I’ve moved around with Mathias in the room today, ‘what about payments?’ Well expenditure as a share of the economy is projected to be lower than what I outlined previously in last year’s Budget. The blue line is expenditure as a share of the economy, in what I announced in last year’s Budget, the green line is where it is this year, and so in this year’s Budget we’ve managed to keep expenditure as a share of the economy below what we said it would be in last year’s Budget despite the fact we’ve reversed out all of those measures from the 2014-15 and 2015-16 Budget. And that [inaudible] to 25 per cent of GDP, a quarter of the economy by the end of the forward estimates period. Now payments growth has been restrained at less than two per cent a year, and you’ll recall that we inherited payments growth at 3.5 per cent plus when we came to Government. So this is a Budget that does continue to control spending. Payments growth at less than two per cent per year.
On revenues, the decision to reverse those previous measures obviously comes at a cost to the Budget, and this means as a pragmatic Government when those measures aren’t available to you, you don’t get the option of not balancing the Budget over the forward estimates, and as a result we’ve had to turn to revenue measures to do that. Now, this is basically a Senate tax for things not going through. You need to raise the revenue to make up, you can’t pass savings through the Senate and that revenue unapologetically then has to be raised to ensure the Budget remains upon its trajectory. Now that hasn’t come at the expense of not continuing to pursue expenditure restraint as I have just demonstrated, these two things have occurred together.
And notwithstanding the additional revenue measures that we’ve had, what you can see here is the taxation receipts. The grey line is what we expected to collect in revenue in the 2016-17 Budget. The aqua in the middle is what we thought it was at MYEFO and the blue line is what we’re saying in this Budget. And what you can see is that our taxation receipts in nominal terms, particularly compared to last year’s Budget, are actually less. So, there’s less nominal tax revenue coming in in this Budget than what I said in last year’s Budget over the same period of time. And what you can also see here is the changes to taxation receipts – estimates since MYEFO – and what you can see from that is once again we’ve had a negative write-down on our parameters for revenue over the Budget and forward estimates, that’s the red on the bottom. The olive green line there is the policy decisions on revenue and you can see that on this, we have a positive position over the Budget and forward estimates. The dot in the middle is the reconciliation between those two points, and so you can see there that we’ve taken policy decisions and they have also had in part to compensate for the negative write-down when it came to the taxation receipts within the parameters. And you say, well hasn’t commodities supported parameters on revenues? Well, there’s swings and roundabouts. What you pick up on the swing, when it comes to commodity prices, you lose on wages growth when it comes to other tax receipts. And, that’s one of the things we’ve had to contend with in the Budget.
Now, if you look out over the period of time over the Budget and forward estimates you get to 23.7 per cent of taxes as a share of the economy which, as I said, is below the tax cap. When we reconcile between the years, that was the cumulative deficit position in MYEFO, we have had a negative policy write-down on decisions of $14.5 billion as a result of decisions we’ve taken since then. There is actually more than that that is the result of the Senate in gross terms, that has $20.8 billion improvement as a result of policy decisions on revenue. We’ve had a $12 billion improvement on parameters on payments issues, and that has been taken back by 7.3 on taxes on parameters which leads to the overall position of 45.9, which is an improvement since MYEFO over the Budget forward estimates.
So, if we look specifically on the impact of Senate decisions, and this is important, it’s something Mathias has had close involvement with, having negotiated all of this incredibly successfully. But it does come at a cost. The cost on the payments side of what we’ve had to do in the Senate to get things through, or haven’t been able to legislate: $14.7 billion. That’s in the Senate. Now, the overall position on policy decisions that we made in this Budget, the cost there is 14.5. What that means is you net out what has happened in the Senate, and we’ve paid for new expenditure with a very small balance of some $200 million. And so the key impact on the payments side has been, in net terms, as a result of what we’ve had to either reverse out of the Senate or negotiate through.
Now, on the receipts side, we’ve obviously got strong revenue measures here and there was a slight improvement on the revenue side to also [inaudible]. So that means, that’s how you get the 13.5 net position in terms of impact on what we’ve had to write down from the 2014-15, 2015-16 Budgets.
If I move on, now, to something I had a chat about at the Australian Business Economists a little while ago, a new analysis of debt in Statement 4 of Budget Paper 1. Statement 4, for those who are highly interested in Budget documents and their history and the statements will [inaudible] that good old Statement 4 is back, which of course never made it to [inaudible]. In Statement 4, what we’ve done is we’ve gone back to 2007-8 and we’ve said ‘where has the debt come from? Why have we had to borrow? For what spending purposes have we raised that debt?’ And you can see that: 45 per cent social security, health at 21 per cent, defence at nine, education and training at 10 per cent and so on. Three quarters and more of the debt that we’ve raised, some 500 billion or thereabouts by the end of this financial year, has been raised to pay for what is essentially everyday expenditure or recurrent expenditure. And the whole point of this exercise is to say you need to meet your everyday expenditure with everyday revenue. I’ve talked about good debt and bad debt – that has nothing to do with the quality of the spending, it has to do with what you’re applying debt to. For everyday spending, the first dollar we should spend should be on the operations of schools, of hospitals, on Medicare, on welfare – that’s your everyday expenditure, and that’s what your everyday revenue, in taxes and other revenues should be raised to meet those expenses. When those two things don’t balance up, it means you’re putting on the credit card expenses that are everyday in nature, like putting food on the credit card. If you’re borrowing for things beyond that – capital items like defence, other matters like that, infrastructure and so on – well they obviously have a longer life and are capital in nature and they retain the value they will reach over different periods. Now that’s not to say that education doesn’t have future benefits, of course it does, but those things are consumed there and then, there and now, and that’s what tax revenue should be for.
What this chart shows is a combination of when you look at all the things you’re borrowing money for, and what it shows is that after you’ve got your deficit and then you take out of that the things that you’re spending on infrastructure, on your own books as a Commonwealth, so a lot of that has to do with defence spending, and then you take out of that the grants that you make to states, which are capital in nature, and that includes their net operating balance, so that’s grants on roads and bridges and all of those sorts of things and would include potentially things like [inaudible] schools but what we know is all of the health and education funding that we provide to the states and territories is for everyday expenditure. It’s the states and territories who undertake the capital expenditure. So when you take that out and other non-cash items, then what it shows you that in up to 2018-19 for the first time in a long time we will no longer be borrowing to pay for everyday expenditure. Now I’m not saying that’s the surplus, the surplus is at 2021, but I’m trying to say pretty clearly is it an important financial objective to not borrow money to pay for everyday expenditure, and that’s what this Budget demonstrates. And the reason for including this in the Budget is this is an important transparency issue to understand how we’re managing our debt in the future.
The other thing we’re doing in respect of future tax codes is we’re not drawing down on the Future Fund. Now that’s not just because I think Peter Costello does an outstanding job running the Future Fund, I know because he told me – joking – it’s because if we as we have every ability to do under the current legislation, if we started drawing down the Future Fund in 2021, that’s what happens to it, it’s all gone, in a decade or two, after 2037. But guess what? The superannuation liabilities, they run out all the way out to 2126-27. That’s what I’m calling long-term – really long-term. The decision we’ve taken in this Budget is to say we’re not going to do that, what we’re going to do is let the Future Fund continue to grow so it can reach effectively its tipping point where its growth then matches the drawdown for the liabilities. This is actually saving a century of taxpayers, if we can hold on for another 10 years and not draw down on that fund. It’s a pretty simple proposition. The Future Fund is earning over seven per cent, you’re borrowing at less than three per cent, it is actually a good financial idea to meet those unfunded superannuation liabilities off debt in the short term rather than crib the earnings, both realised and unrealised earnings, of the Future Fund over a long period of time. So this is good common sense, financial management that is literally protecting a century of Australians if we can hold to that. And that’s why we’re doing it, it does mean we’re going to need to cut. That there is an impact on the total Commonwealth Government securities on issue, that does mean the gross debt is slightly higher than it otherwise would have been, but that is the price of actually holding onto the Future Fund for longer and not raiding for very temporary purposes at quite extreme long-term costs.
The net debt is also projected to repeat in 2018-19 both in nominal and in percentage of GDP terms and then all thereafter for some 8.5 per cent by the end of the decade. We go into forecasts, this is very important for the particularly for the agents and we demonstrated this at the end of last year. Our forecasts are very conservative, they’re very much in the pack as you can see our views on global growth actually sit below the IMF forecasts. And what these sort of snail trail charts show is this is why I’m saying there are better days ahead, because these particular points up here these points where these things are starting to tick up. Now following that year of forecasting you can see year after year you know you turn up to G20 meetings, my predecessors, Mathias and my predecessors, and the number was still going down, every single time. They’re starting to tick up and people are starting to see turning points in the global economy. That’s why I believe there are better days ahead. But not just globally, they are also here in Australia as well because we’re well positioned to grow into that global growth. And again, the IMF’s forecasts are actually stronger than ours, or the same as ours over the forecast period. And our forecasts stick very much in line with the consensus forecasts that are being raised domestically as well. So, our forecasts, whether it’s on our commodity prices or in our growth or others sit I think very much in line with what we said at the end of last year, and I think very much in the centre of what people are projecting, not just ourselves but those from other agencies both global and domestic.
Now I won’t run through all the measures, because I’m sure you’ve read them all. I’ll make a quick point about this, that is the fall in mining investment as a share of the economy that we’ve been pretending that since about 2010 or since the peak of the mining boom is. I mean the Australian economy is quite amazing that despite that slump in mining investment we have still grown every single year. That is extraordinary growth effort and is a tribute to every Australian who’s gone to work over that period and everyone who’s tried to. We’re starting to see as both Phil Lowe and previously Glenn Stevens [inaudible] that that steep fall is now starting to turn and we expect to see that happen over the forwards and we expect business investment in the non-mining sector to be more positive.
If you look at real consumption, remember household consumption is the biggest driver of our national accounts, this looks at going back to the mid-1980s and in that period what you can see is household consumption since the GFC sits well below on average going periods to right back in the middle of the 1980s when I was leaving high school. And while we’ve got a more optimistic view about household consumption going forward, even at those levels they still sit very, very modestly compared to the previous experience, and that’s one of the reasons why revenue growth has been an issue.
The better days ahead for the resource sector, for the service sector, for agricultural exports. I mean positioning ourselves with our trade agreements has been a smart decision and the right decision so we can grow into global growth. You go to places like Tamworth and Toowoomba and you can see it. You can see the benefit of the agricultural exports making its way through those towns and that’s an excellent and a pleasing thing to see.
The Budget itself and the measures that it contains, you’ll see will be focusing on those four areas which I outlined at the start.
Let me talk about the NDIS. We both supported, that is the Opposition and ourselves, the NDIS since it first started. It has been a genuinely bipartisan national issue, but there is one area that we disagree on and that is how you pay for the Budget gap. And we’ve tried to do it through savings and that was unsuccessful. The difficult decision we’ve had to make is how do you look someone with a disability in the eye, or their carer, or their family member, or their friend, or their parent, or their cousin, or their mate, or their customer, or their boss and say ‘We just can’t agree on this, so you’re just going to have to live with uncertainty about the NDIS.’ No, we won’t do that. What we’ve decided to do is what the previous government did when they set it up, and that is to increase the Medicare levy by half a per cent to ensure that the NDIS is fully funded, and that’s the gap, and that’s been fully funded in this Budget.
Now we don’t strike the levy until the bills start coming in and that’s important. This is to fund the NDIS, that’s it. It’s not to make up for anything else, it’s to do a job and to be able to give guaranteed certainty for everyone who is relying and depending on the promise that this Parliament made to deliver them that service. And we will fund it, and I sincerely hope that the Parliament can meet us in the middle on this and actually agree to fund it in this way. Yes, it’s an insurance levy on all Australians, pretty much. There are carves outs for the people on the Medicare Levy, you all know what those are and they phase in at high levels of income, for families with multiple children and so on. But, it’s all our responsibility. We all can potentially be a recipient, family members could be. It’s all of our responsibility and therefore we all have to bear it and that’s the fair thing to do, it’s the right thing to do and we should agree to do it now, so over the next two years we can stop disagreeing about how to fund it and focus on doing it and explaining to Australians, who will be paying for it, what it’s going to do and address their concerns about how it’s going to be run and what it’s going to deliver, because I know there are concerns on that and there are and we’ll address that over the next two years and hopefully work together as a Parliament to achieve that as well.
We’ll also guarantee the Defence spending at two per cent that comes in within this Budget, $320 million to the AFP, you’ve seen those announcements. On Medicare we’ll remove, we’re lifting the freeze progressively, we’re reversing the issues on diagnostic imaging and all of those things which we’re very familiar with and that’s part of the reversal of measures that I have referred to already. We guarantee Medicare, and ensuring that equally we have that transparency, that understanding about how these programs are funded and what is being paid for.
On schools, you’ve seen the statements and this simply says what we’re proposing to do and you can see that we’re lifting the level of expenditure over the next 10 years, fairer funding for schools with a clear standard, Gonski 2.0, call it whatever you like, but I know what the kids are going to call it and respond to it by saying thank you, because it’s for their education. This isn’t about funding schools; this is about funding children’s education. There’s a difference. We’re funding what it costs to deliver that education to that child and to do it in the fairest way we possibly can without these special deals and getting everybody on the same level as I was explaining to Laurie over the weekend in that interview.
Moving on, rising cost of living. I won’t rehearse the Prime Minister’s energy plan, you’re familiar with that, but I will state that in that plan I announced tonight that we’ll be working with the Victorian and New South Wales Governments to increase our share of the Snowy Scheme, the benchmark for national infrastructure and those discussions have already started with New South Wales, and the Prime Minister has spoken to the Premier Andrews this afternoon and he has also expressed an interest in pursuing those discussions. The conditions are pretty straight forward, one, that the realisation of those assets from States then go into state infrastructure, two, there needs to be a maintenance of the regulatory standards, all the licenses, all those things need to be honoured, and mitigation of the Commonwealth risk around regulation needs to be covered, and thirdly, it remains in public ownership. So, that is another big opportunity for us to get more capital, to release more capital into state infrastructure projects and allow us also to pursue our Snowy 2.0 agenda.
On the banks, you’ve all seen what our decision is on the banks. Let me start though with the first one, the one stop shop. What we’re saying is we’re going to do things on the banks now. We’re not going to wait three years while lawyers troop around the country; we’re going to do it right now like we already have over the last twelve months. What that means is a one stop shop to ensure that people can get affordable access to finding outcomes and having their complaints and matters dealt with. That has been a key issue I think of the grievance that Australians have had with the process, of getting affordable access to having these things resolved and to get certainty.
In addition, we’ll be introducing a new executive accountability regime, where certainly bank executives in key roles will have to be registered and if they muck up they’ll be deregistered and that means they can’t carry their problems to another bank and their bonuses can be pulled back, and this is all modelled on a very similar system that has been working properly in the United Kingdom which I had the opportunity to see earlier in the year.
On top of that, there will be increased competition with a standing unit within the ACCC, as well as a move towards an open banking system next year, and there’s some measures in that area. And yes, the banks are going to have to pay more tax. The only people who will be paying more tax on 1st July of this year are large banks and multinationals. Both of them are being called on through integrity measures and a higher levy on the top five banks, which is not set on their deposits, it’s not set on home loans. The previous bank deposits tax, that was a deposits tax, the previous FID tax was a deposits tax. This is not a FID or a deposits tax; this is a levy on their liabilities, which also doesn’t include their tier one capital which is about ensuring that they remain unquestionably strong. So, the banks can do more to support the job of Budget repair given that we’ve got a $13.5 billion bill from the Senate to ensure that we run balance in the Budget.
On affordable housing, it’s a comprehensive plan. It’s not a silver bullet nor is it [inaudible]. The reason we have a housing issue, particularly in the hottest markets is because supply has not kept up with demand. What you can see there is the ratio of dwelling completions to population change, and what you can see here is dwelling completions for a very long period of time, since the early 2000s has not been keeping pace, not keeping pace with the population growth. So, we have a series of measures which go right across the spectrum and we have a couple of problems, we have got a problem up here in the home ownership end, which means if people can’t get into home ownership they stay in rented accommodation, which puts more pressure back through the system on the private rental market, affordable housing, social housing, and indeed pricing housing with homelessness. So it is important to help families save to get a house and we have given them a tax cut to do that on their savings in a very simple way by doing it through their superannuation. Right across the board we have got measures that deal with unlocking supply. The National Affordable Housing Agreement will now become a conditional agreement on States and Territories actually delivering more houses and reforming their planning and zoning systems. There will be a Housing Infrastructure Facility that will clear bottlenecks, the release of Commonwealth land starting in Maribyrnong and also in Western Sydney will be supporting affordable housing with low-cost, long-term, affordable finance for a National Housing and Finance Corporation using the bond aggregator model we’ve been working on, and there will be tax incentives for foreign investors and mums and dads with a capital gains tax extra discount up to 60 per cent and foreign investors will be able to invest in managed investments trusts which can invest in affordable housing.
Mum and dads will be able to keep putting roofs over the heads of the 30 per cent, 25 per cent of people renting in this country. We will not be taking away their negative gearing or their other capital gains tax concessions. We will temper the demand in the investment sector by using a scalpel of regulatory arrangements with APRA and ASIC and we are extending APRA and ASIC’s reach into the non-ADI sector as well and be very specific about their powers to be able to target their regulations to particular locations when it comes to loans and things of that nature. We’ll tighten up the foreign investment trials, which mean removing the capital gains tax in principal place exemption for foreign investors, and something you may not know, we’re going to restore the 50 per cent cap on sales to foreign investors on developments, which was removed by the Labor Party. In fact, it was removed by Chris Bowen and I’m putting it back on.
States funding – we actually paid, as a Commonwealth, through the GST, and the other [inaudible] more than half the education costs in this country. More than half – fifty two per cent. They’re 2015-16 figures. When we look at this this shows the money that goes to the states, we go to the next chart, you can see hospitals and schools funding all going up to the states and territories. The last slide is important to those who are interested in GST. These are the decisions we have taken to increase GST revenue by improving its integrity. And, so there’s some $5 billion in extra GST revenue that the states will get, more than that, because we’ve been tightening up the GST. That’s not money that goes into the Commonwealth, that’s money that goes to support the states. Now I’m sorry I’ve taken a long to take you all through that, but there’s a lot in this Budget, and I’m happy to take questions.
QUESTION:
Treasurer on the bank levy, initial signs are that banks aren’t happy. What would be your advice to any of the banks who threaten to pass this onto consumers in some way, through increased fees etc?
TREASURER:
Well they can’t go and lie to customers. This isn’t a levy on their deposits, it’s not a levy on their mortgages. They will have to be honest. I mean banks can jack up prices on their customers every day if they like. I don’t recommend they do and if they did, take your money somewhere else, perhaps put it in a regional or smaller bank. This does even the playing field a bit for those regional and smaller banks. The ACCC will be watching this closely and if there’s any misleading conduct or misrepresentation by the banks in relation to this matter, they’ll be on it and they’ve been funded to do that job.
QUESTION:
When you’re talking about Medicare guarantee and the legislation, what are you actually guaranteeing? What are you saying to mums and dads?
TREASURER:
That it’s fully funded, and the money will be there to pay for those bills. We’ve lifted the freeze, we’ve reversed the other measures and we’ve fully funded those commitments in the Budget and the money goes into a special account supported by the Medicare levy and the other transfers from personal income.
QUESTION:
How are there better days ahead for the thousands of taxpayers that you’re going to slug $8 billion in increased personal income tax?
TREASURER:
As I said before, Sam, this is an insurance scheme, and when this was first introduced, it was well supported by the Australian people because I think they’re very fair-minded, and I think like Parliament they value this scheme because they understand real struggles that people less fortunate than themselves, who struggle with disability, their carers, their parents and others go through. This scheme has received tremendous support from the Australian people out of good faith and good natured support. And they know that it should be paid in full. The Government has sought to do that in one measure, and that hasn’t proved to be successful. I think they would join with me in saying that we want to support you and we know this is a shared responsibility and we’re prepared to do that.
QUESTION:
On the welfare measures, why are you bothering with drug testing the jobless? That’s something that Tony Abbott looked at and abandoned a few years ago. What’s the point of it?
TREASURER:
It’s important that people get into work. You want to save money in the welfare budget? The best way to do that is to make sure people get jobs and get them off welfare and into work; that’s how you really affect the welfare budget in the long-term. And one of the things that prevents people getting into jobs is, sadly, substance abuse. And so what we are seeking to do here, Australians I think are prepared to support people through the welfare system, but it’s a two-way street, and where people are suffering or are affected by substance abuse, on the first occasion, if they aren’t able to turn up to an interview or something like that because they are in a drug-affected state or they were drunk or something like that, well there won’t be a second chance the next time. And this is about actually trying to create some responsibility in the system. And, it’s a trial. We try things. If they work, we keep doing them. If they don’t work, well we won’t keep doing them. I think that is a fairly pragmatic approach. But I think we have to understand that in welfare there’s a two-way street. There is some $1.5 billion in improvements to the Budget from our measures in social services in this area. On top of that, what would happen in that case if they were found to be tested and drug-affected because of their failure to comply with the mutual obligation principles, they may be referred to treatment, and that may assist them get on top of their problem and get themselves in a position to get into a job. We want to see people get into jobs, and drugs and alcohol are stopping them from doing that, then we’ve got to help them get off it.
QUESTION:
Treasurer, with regard to the facility to fund the Inland Rail over the forward estimates, are you happy that has the capacity to attract private sector investment, and how do you think that will work?
TREASURER:
Well, we are making an injection into Australian Rail Track Corporation along the lines that we’ve said. This ensures, based on the advice we’ve received, that we will be able to pursue that project, and the extent to which the private sector can be involved in that, then that is welcome, and there will be opportunities to do that. What we have done is ensure there is sufficient provision there for that company, a contribution that would ensure that very significant piece of nation-building infrastructure, which doesn’t just support Melbourne and Brisbane, but it supports every region along the route.
QUESTION:
How confident are you that you’ll deliver that $7.4 billion surplus, and is this the Budget to save the AAA credit rating?
TREASURER:
Well, at every statement and every Budget, David, you and others all tell me the AAA credit rating is going to go, and it is still there. And we’ve listened carefully to the issues the ratings agencies have raised. They have said: don’t put things in your Budget that you don’t think are going to pass, and we have addressed that in this Budget by reversing out the measures from the 14-15 Budget. They have said: take decisions which ensure that you are able to maintain your projection – let me underscore, projection. I don’t go around promising these things. I tell you what the projection is, based on the decisions we are taking in the Budget, and that projection remains now, it goes to $7.4 billion dollars. Now, I think that will be well-received, but it’s ultimately a matter for those agencies to make their own decisions. But the balance has been maintained, and in fact improved in that year. We have, I think, got a very credible set of forecasts that are consistent with what’s being said globally as well as domestically, and the measures that we have included in our Budget don’t include things that I don’t think we can reliably claim in our Budget any longer.
QUESTION:
[inaudible] policing their welfare payments because their drug and alcohol problems caused their disability as part of the welfare crackdown. So what happens to them? Where’s their savings measure?
TREASURER:
Well to be clear the DSP change only relates to those who are seeking to claim the DSP solely, that was the only reason they had a potential claim. That is quite a specific provision. Now, there are other forms of cash support in the system, job centre payments and things like that, to support people who are not in work. The DSP is different. The DSP is for people with disabilities, and it is only responsible and fair that if people are seeking to claim a higher benefit payment on the basis of a disability that is a result of their own actions of taking drugs and being inflicted by alcohol abuse, well I don’t think the Australian people are going to wear that. There are other forms of support for people in those situations, but it won’t include the DSP.
QUESTION:
Are you expecting a political backlash from elements of your own Party as you walk away from the unlegislated measures from the 2014 Budget? And have you broken the news to Tony Abbott and Joe Hockey?
TREASURER:
Well the Party Room’s after this, later this evening. We’re a practical Government, and practical governments deal with problems and solve them because that’s what we were elected to do. This is not a Budget for ideologues and all of that; this is a Budget for Australians who want the Government to do its job, and that’s what we are doing. I know every single member of our team wants to be a member of a Government that does its job.
QUESTION:
Treasurer, on the Medicare guarantee, you said it shows it is fully funded, the Medicare levy though doesn’t fund full Medicare…
TREASURER:
No, it doesn’t.
QUESTION:
…so how does it show it is fully funded?
TREASURER:
Because what the provisions in the legislation require is the transfer out of personal income tax revenue, the balance of the full cost expected and estimated over the four year estimates period, so that one transfer, direct transfer coming out of the Medicare levy, that portion which goes towards both the MBS and the PBS and the balance of what is required which is about almost two thirds will come from transfers out of the personal income tax. So that goes into the special account and that pays the bills.
QUESTION:
And just on the random drug testing, are you saying you random drug test once you are not necessarily off your benefit?
TREASURER:
No, it’s not.
QUESTION:
How do you get to wages growth projection of above three per cent over the next four years? [inaudible]
TREASURER:
I can take you back to the charts if you like, but we have seen is the performance of our services sector, our export sector, improvement of household consumption over that period of time, we’ve had good positive income pick up which affects the base in our most recent set of numbers that are coming through. We are growing into a growing global economy and that’s what flows through to wages. So, when I say better days ahead, I think these are conservative numbers, they are very much consistent with the other forecasts that other agencies have been putting together. [inaudible]. That’s what we are planning to see. We have an Enterprise Tax Plan which is cutting tax for businesses, which is encouraging them to profit more and grow more and pay people more and we’ve got $75 billion in infrastructure investment over the next 10 years to support growth in the economy, we’ve got the Defence Industry Plan which is rolling out all around the country, breaking ground on the facilities there in South Australia shortly, and we’ve got out trade agenda which continues to power on, with further gains made in the last 12 months. So, this government has a strong economic plan to support more and better paid jobs and that’s supports the numbers together with consensus…
QUESTION:
Given the skyrocketing house prices, property prices, do you think the $30,000 in savings plan is enough for first home buyers?
TREASURER:
I think it is fair, I think it is fair. Remember this is per person so that means $60,000 for a couple, and this means that they’ll be able to save 30 per cent faster than they could otherwise. Now there used to be a first home saver account and that was a complete flop, and one of the reasons it was a complete flop, it was just too hard, it wasn’t simple, it was out of your after tax income and you had to set up an account and there was a range of other factors that applied to it with additional payments. It was confusing and it didn’t work. What we sought to do is get over that problem by the simple process of ticking a form which says in addition to my compulsory superannuation which goes out, I want to save an additional three per cent of my salary or five per cent or two per cent or 10 per cent, whatever you decide to do as a family, that goes into your superannuation account, its taxed at 15 per cent, not your marginal rate, your earnings are taxed at 15 per cent, not your marginal rate, and when you take it out, its your marginal rate less 30 percentage points. So, we think that’s an attractive scheme, its rewarding for people who want to save and its helping them get there faster.
QUESTION:
You talked about downsizing. Why would you downsize when that means you are going to lose the age pension?
TREASURER:
What we’ve done on downsizing ensures that those who do downsize can commit up to $300,000 each as a non-concessional in their superannuation. That’s an affordable measure, and that’s the Budget can afford, and that’s what we’ve done.
QUESTION:
[inaudible]
TREASURER:
Well it depends on what your level of assets are. And the changes that have been made to the assets test, people also have superannuation if they’re on the pension as well, and that means they may be able to have more investment in their superannuation, which means they’d have higher earnings on that as well. But the Budget wouldn’t be able to sustain the measure you’ve suggested.
QUESTION:
Just on the GP freeze, so you’re only taking the freeze of payments in the first instance for kids and concession card holders and then not taking the freeze off the general GP rebate for another year. Do you have an estimate on how many visits are bulk-billed or what the reduction in out-of-pocket costs will be when the freeze is lifted in a year?
TREASURER:
Happy to take that one off the line, Sam, but we do know bulk billing rates are already higher [inaudible]. Bulk billing continues to perform very strongly right across the country. We’ve taken the behavioural impact into the numbers.
QUESTION:
[inaudible] it would only be like 60 cents.
TREASURER:
I’m not going to delay the rest of the press conference, but I’m happy to take your question offline.
QUESTION:
You refer to the 2014 measures that couldn’t get through the Senate, the sentiment in your speech, certainly through this Budget is that you’re a more kind and understanding Government than perhaps people thought you were before. How much of the reversal is because you couldn’t get these measures through, and how much of it is a concession that this is just what [inaudible]?
TREASURER:
This is a practical Budget, but one of the things that I’ve reflected on and the Prime Minister has reflected on is the fact that people’s wages haven’t been growing. We need to understand that that makes their sensitivity to the services they rely on and the cost of living pressures that much great. So it’s fair to say that yes, we were unable to get those measures through, but we accept that, we accept that, and one of the reasons I think we can accept that is as a result, particularly with some measures, then that acute sensitivity will be relieved somewhat. But, it’s a practical Budget making decisions on the big issues that are in front of us.
QUESTION:
Were you too mean?
TREASURER:
I think that’s a very unkind way to put it. I mean, every Treasurer has to deal with the circumstances in front of them. I have, Joe had to, Peter had to, and, you’ve got to call it as you see it at the time and I respect the Treasurers who’ve had to sit in my chair and make those difficult decisions and I make no reflection on any of them. At least not in my mob.
QUESTION:
Were they bad measures? Were some of them just bad measures?
TREASURER:
Look I’ll give you an example, because I advocated for this one probably stronger than anyone. I think it’s a bad idea, always have, that you send a message to kids coming out of school that your next stop should be the Centrelink front door. I’m very disappointed that measure didn’t pass. It’s been very effective…
QUESTION:
The waiting period?
TREASURER:
The four week waiting period. Remember when I was Social Services Minister, I thought the six month wasn’t right, and I took it back to four weeks, and I put other exemptions in to support people who maybe couldn’t have gone home because of domestic violence, or they had other challenges. I targeted them, because all I was trying to do was to ensure that kids didn’t go from leaving school to walking into Centrelink. That still troubles me, and we’re going to keep working on that issue. We can’t pursue that measure, they’ve decided they won’t support it. You’ve got to rule a line and move on. That doesn’t mean these measures weren’t trying to deal with real problems – they were. The Senate didn’t decide to agree with us and how we could deal with those problems. But the problems remain, and therefore the solutions will have to keep coming.
QUESTION:
On these figures, would you rule out any [inaudible] of tax cuts for the next few years?
TREASURER:
Well you’ll have to wait until next year’s Budget, I won’t answer that. Let me make this point about the NDIS, because it relates to this. That comes in in two years’ time. The Coalition Government will always want to reduce personal income taxes. That’s what I did in last year’s Budget. That’s what other Liberal Treasurers have done, and we’ll always want to do that. But whether you reduce personal income taxes in the future or not, and if you do, guess what, the NDIS is still fully funded. It quarantines that money to ensure that those people who rely on that scheme can always rely on that scheme. And the political fights about that should be [inaudible]. If there’s one thing we can meet on the middle, I will hope and pray it’s the NDIS.
Thanks everyone.
Attachment: Slide pack [PDF 1.7MB]