DAVID SPEERS:
The deficit is more than twice what you thought it would be a year ago, spending over the forward estimates is higher than any time during the Howard Government. Is the Budget crisis really over?
TREASURER:
Well no, we’ve still got work to do in relation to Budget repair but we’re on the right track, David. In the last 12 months alone, we have lost nearly $52 billion of revenue because we’ve had a massive fall in the iron ore price and we’ve faced the biggest fall in the terms of trade in the last 50 years. Now we’ve managed all of that, the Australian economy is still one of the fastest growing developed economies in the world. We’ve been able to cope with a whole range of challenges and we’ve come through and what we’re seeing is the Budget is on a credible trajectory back to surplus, and the same trajectory was announced at the end of last year.
DAVID SPEERS:
When you say the $52 billion revenue write down, we should stress this is forecast revenue that’s not going to be the actual revenue. The actual revenue is higher year on year, and spending as a proportion of the economy is actually still, this year and next year, 25.9 per cent of GDP. We still have a spending problem, don’t we?
TREASURER:
Yeah it’s still too high and that’s why we’re getting it down as you can see from our forecasts in the Budget. We’re bringing it down each and every year. In fact David, if you look closely at the actual dollar…
DAVID SPEERS:
It’s still higher than any time under the Howard Government though…
TREASURER:
Well, I wish I had the revenue of the Howard Government, I wish I had those revenue streams….
DAVID SPEERS:
I’m talking about spending though. The spending break is still higher than any time under the Howard Government.
TREASURER:
Well, and it’s too high… This is what we inherited. We inherited a Budget that every day the Government had to borrow over $130 million just to pay the bills. Now we’ve got it down to $96 million, there’s still a lot of work to do David, there’s no doubt about that. And we are determined to do that work but at the same time we want to see the Australian economy grow, and we want Australians to invest their own money. So you’re not seeing hand-outs out of this Government, what you’re seeing is us giving, particularly Australian small businesses, back more of their own money, so that they can have a go and invest.
DAVID SPEERS:
I want to get to that, but what do you say to the criticism [inaudible] tonight that you’ve gone soft on spending cuts and instead you’re allowing bracket creep to help you achieve modest improvement in the Budget bottom line over the coming years?
TREASURER:
Well if the Labor party is worried about us spending too much money, then they can back $30 billion of savings and spending reductions that we have sitting in the Senate, and in fact David, they can back $5 billion of their own promised reductions in spending which they have been opposing ever since they went into opposition. So yes, there’s more work to be done but I expect all of the critics out there to come and give us a hand to reduce government expenditure.
DAVID SPEERS:
Alright, and what about bracket creep, because you did say just hours ago in a press conference that this incentive to work… it’s going to hurt economic growth and you’re not doing anything about it over the next four years.
TREASURER:
Well, we have it built into our medium-term plan to do something about it because we recognise that the only way you can get the Budget back to balance is to reduce government expenditure over time, and importantly we are saying that it is unacceptable to have Australians drift into those higher tax brackets, because ultimately that slows down economic growth and it ends up being a downward spiral for the economy. So we have to give back tax cuts, but we can’t give tax cuts back until we have further reductions in expenditure, and we can only have further reductions in expenditure if we can get some of the key initiatives through the Senate, which I’m sure we will be able to do.
DAVID SPEERS:
Let me ask you this though, before we get to small business, why is it okay to let you and me and all average workers pay higher and higher tax rates through bracket creep? But not okay to do something about superannuation taxes on the very wealthy? I mean your own Treasury Secretary has said this is something we should look at, you yourself only a month or so ago, were open to looking at this….
TREASURER:
Well, we are endeavouring to give people stability and certainty in relation to superannuation. As the Governor of the Reserve Bank identified only recently, a lot of self-funded retirees and people who rely on their savings are over time going to have lower returns because interest rates are very low. So, we’re recognising that. What we want to do is give them stability and certainty. Labor wants to introduce a new tax on superannuation, if they do that, that’s going to hurt households that rely on their superannuation to live on, and continue with their lifestyle…
DAVID SPEERS:
With respect Treasurer, you said in March that it is extraordinary that someone with $12 million in super pays no tax.
TREASURER:
Yeah. And what we’ve done since then is had a look at how many people are there in that position. There is literally, you know, there is probably a dozen Australians that, under Labor’s laws, actually piled money into superannuation to get that sort of money. Well, if you’re going to change the laws to have any impact on revenue, it has to affect a lot of people. Hundreds of thousands of people, David, and we do not want to hit Australians with superannuation at a time when they’re getting lower returns for their money in the bank. We want to have a system that is stable, and certain, and that’s why I said tonight that there will be no new taxes on superannuation under this Government.
DAVID SPEERS:
Now tell me about small business. A big shot in the arm you’re trying to give them tonight. Clarify for me, who is a ‘small business’ that will be able to take advantage of this instant asset write off in particular, and I’m assuming the same rule applies to the sorts of assets they can buy?
TREASURER:
Well, it’s any business with a turnover of less than $2 million a year, this covers 96 per cent of all businesses in Australia. Importantly, from 7.30pm tonight, any assets they buy under $20,000 they can instantly write off on their tax, and that is a huge incentive for people to go out and have a go. Invest money, buy the plant equipment, buy the tables and chairs for a coffee shop, buy new kitchen equipment, buy computers. We want Australians to go out and have a go, and invest because the big drivers of growth and the big drivers of jobs into the future are going to be Australia’s small businesses.
DAVID SPEERS:
And the final question, how will you judge the success of this? Is it going to be employment levels, economic growth levels? How will we know whether this has worked?
TREASURER:
Well fundamentally, every Budget needs to be the next step in an economic plan. Everything we are doing is part of our plan which we’ve considered carefully, and consulted widely on. This is one further step to build a stronger and more prosperous economy, David. We’re on track; economic growth is going to increase. We can see the unemployment rate levelling off at 6.5 and coming back down, and most importantly, our offshore trading partners are looking to improve their own economic growth, so we get to see good growth in exports as well.
DAVID SPEERS:
Treasurer, Joe Hockey, thank you very much for joining us this Budget night.
TREASURER:
Thanks very much.