PRESENTER:
Well, in the domain now of FIVEaa is the Treasurer, Joe Hockey. Joe, you’re looking well.
TREASURER:
Leon, great to be with you, you’re looking well too.
PRESENTER:
Yes, I’ve been doing a lot of work to lose some weight, so…
TREASURER:
Oh good on you.
PRESENTER:
I think we’ve both been doing the same thing, haven’t we [laughter]. Yeah, look, the Australian economy is under the pump, we have have a soaring debt, we’ve got an interest to be paid of $100 million. We’re spending $100 million every day to pay our bills. Unemployment is the highest in this state. Now, we’ve got a situation where the Australian Submarine Corporation is very, very delicately waiting for a decision. Currently they’ve got a workforce of 2,000 and I know that you’ve got a thing called the RAND report which is saying that we should build a lot of stuff offshore. Now, can you, can you honestly tell the people of South Australia today, that there will be enough work, a critical mass of work and investment, to sustain those 2,000 jobs we’ve currently got there?
TREASURER:
There’ll be more jobs associated with submarines into the future, than there are today.
PRESENTER:
More than 2,000?
TREASURER:
Yeah, there’ll be more jobs.
PRESENTER:
Explain how?
TREASURER:
Well, as we’ve said, our commitment is substantial. Look, Australia is going to have inevitably a larger submarine program than what we have today. Why? Because from a national security perspective, we need to have the deterrence associated with submarines, for our naval fleet. We have for example, built over the last few years, massive and significant gas pipelines on our coastline. Not just one point on the coastline but all around the coast, and that represents, there are economic issues associated with that. We need to have a strong, well-resourced defence force, including a navy that has all the resources it needs and the very best equipment Leon, the very best equipment…
PRESENTER:
But we’re talking a little parallel here because what I’m really asking you is this. First of all, give me your personal opinion, you’re a member of Cabinet. Would you like to see the subs, would you like the submarines to be built in South Australia as was promised before the last election?
TREASURER:
Well, of course I want to see submarines built, maintained…
PRESENTER:
In South Australia?
TREASURER:
In South Australia. I mean of course I’d like to do that but…
PRESENTER:
So that is your position is it?
TREASURER:
But, but, well hang on, hang on, I’m not getting into trick questions because…
PRESENTER:
It’s not a trick question…
TREASURER:
No, no, no, it’s a good point I understand where you’re coming from, but, but the starting point has to be, I want us to have the best submarines in the world to protect our country. I am a Treasurer for the whole country, not New South Wales or South Australia, but every Australian. What I am focused on is our national security. How do we protect our nation, that has always, you’d understand that, I mean it’s the same with anything that’s built [inaudible]…
PRESENTER:
Yeah, yeah, but Joe, Joe, as you know the problem is that we just had a submarine conference here in Adelaide with some very high powered people…
TREASURER:
Which is good.
PRESENTER:
Yes it is. But let me tell you, and I’m not telling you anything you don’t know, that the advice from that conference was that we should be building our subs in Australia. Now, we’re getting a lot of messages from Canberra saying sorry guys, we don’t think that’s going to happen.
TREASURER:
Well, we have a process underway to identify all the issues, to consider all the options. I’m going to leave it to that process but Leon, there will be more jobs in South Australia associated with submarines into the future than there are today.
PRESENTER:
More than 2,000?
TREASURER:
I can’t give you specific [inaudible]…
PRESENTER:
Please, you need a critical mass to support the numbers that are already here.
TREASURER:
I’m saying there are more jobs then there are today. Now, you say there’s 2,000, I don’t know if it’s 2,000 direct or indirect, I don’t know exactly how many…
PRESENTER:
I got the numbers from somebody who actually organised the conference, trust me…
TREASURER:
Okay that’s fine, but I’ve got to deal with, I’m saying to you there will be more jobs in South Australia associated with submarines into the future than there are today.
PRESENTER:
Okay, now you got a couple of warnings. One from David Murray, who is concerned about our AAA rating. Now because we are borrowing so much money every day just to…
TREASURER:
Yeah, $100 million, you rightly say, $100 million a day just to pay the bills…
PRESENTER:
But because we’re doing that, if we were to be downgraded from AAA that would mean that interest would cost us more. Also David Murray is warning that the banks are actually undercapitalised. Surely you must be concerned about this and if you are, what are you going to do in your Budget, have you factored that into your Budget? Because Deutsche Bank are also saying we could be facing deficits for 15 years, this is all in the Fin Review it’s all out there. So, is your Budget coming down in the next couple of weeks taking all this into consideration?
TREASURER:
Of course it does. Of course it does. One of the reasons why we are trying to rein in overall spending without hurting the Australian economy over the medium term, is because current spending levels are unsustainable into the future. That’s why, we’ve said we’ve got to have higher education reform, we need to have some welfare reform, we need to get the balance right in health, because if we do not reduce the current trajectory on expenditure, we will never get back to the point where we live within our means.
PRESENTER:
The problem you’ve got is that the last Budget you tried to get through the Senate on those cuts that you talk about, or reforms as you use the word, but they said no. So my point is…
TREASURER:
Well, they’ve got to get to the point of common sense, because Labor controls the Senate. Let’s be fair dinkum about this. The Labor Party is the alternate government, not the Greens, not the independents, not Nick Xenophon or anyone here. The only other mob in Australia that can form a government are the Labor Party. So, the Labor Party, if we were to lose the next election and I hope we don’t, but if we were to lose the next election the Labor Party would have the same problem and you cannot tax your way to prosperity, you cannot tax your way to prosperity. What you’ve got to do is live within your means. Now, 86 per cent of all government expenditure is tied up in legislation. Most of that is demand driven, that is, it responds to the demands of the community. So, there is no cap on Medicare, there is no cap on welfare, there is no cap on a range of different government expenditures. The only way we can reduce expenditure is if it passes through the Senate, and the Senate is controlled by the Labor Party.
PRESENTER:
What are you going to do, because, do you believe your Budget will be dull and boring? Your side have said this, they’re the words they’ve used.
TREASURER:
It’s not going to be last year’s Budget. It’s going to be a Budget that focuses on jobs and growth, it’s going to be focused on…
PRESENTER:
But you’ve got to get it through the Senate?
TREASURER:
Well, it is a Budget that we are endeavouring to do more with less.
PRESENTER:
If you can’t get it through the Senate, what are you going to do? Given what everybody else is saying?
TREASURER:
Leon, you’re asking me to speculate on, I’m very confident that this will get through.
PRESENTER:
But last time you were and you didn’t. So what will be different?
TREASURER:
Well, I think people understand that we are endeavouring to pay for all the new expenditure. We’re paying for it with savings and by not proceeding with other things. We are also doing everything we can to make sure that there is a focus on jobs. So if Labor votes against this next Budget, they are voting against job creation in Australia.
PRESENTER:
The Fin Review has today said that you have been warned to back away from what’s called the Google Tax, where American multinational companies may or may not be reaching agreements. Now, are you in any way influenced by that?
TREASURER:
No.
PRESENTER:
Because you were at the G20…
TREASURER:
I was.
PRESENTER:
And we’ve talked about this before, about the fact that a lot of these companies are paying not even 1 per cent in the dollar. Now, if the Americans are telling you to be damn careful about taxing these multinational companies, remember this - we’ve got these Trans-Pacific Partnership Agreements that if we sign them, allow them to sue us if we do anything legislatively, which reduces their profits.
TREASURER:
Oh, no, no, no. There’s two issues there. Number one is, whether it is an American company or an Australian company, this has been quite topical, or any company. If you earn your profits in Australia you should pay your tax in Australia and that’s exactly what we’re doing. So, I’m not backing down on the integrity measures. The Government, the Abbott Government is absolutely determined to ensure that companies that earn profits in Australia pay tax in Australia on those profits.
PRESENTER:
So obviously you’re looking at getting more money like the United Kingdom are? Same sort of system?
TREASURER:
It’s not the same proposal, but we…
PRESENTER:
Similar.
TREASURER:
As you rightly said, in Washington last week on the floor of the G20, I worked with my equivalent in the United Kingdom, the Chancellor of the Exchequer, and we’re going to work together on these sorts of proposals [inaudible].
PRESENTER:
I’m going to ask you a whole lot of questions that have come in from email. First of all, the family home, is it in or out for being included in the means test for the Pension?
TREASURER:
No, we’re not changing the arrangements.
PRESENTER:
You’re not going to change it?
TREASURER:
No.
PRESENTER:
Okay, because a lot of pressure on you to do that?
TREASURER:
Yeah and we’re not changing the arrangements.
PRESENTER:
You’re not changing that. Andrew says, and this is what Andrew has to say. He says, when will you crack down on negative gearing? He says what a rort, how about somebody is allowed to buy only one property for negative gearing, it must be a great little tax dodge because some people have thirty or more houses. Also, how about clamping down on corporate tax dodgers. Hockey says he’ll cut the company tax rate to stop them rorting the system, really?
TREASURER:
No, I didn’t say that.
PRESENTER:
Well, no, but I’m just reading what’s here. So, what’s your response to Andrew’s points?
TREASURER:
Okay, well negative gearing. I read a story this morning that said, that suggested, that rich people get most of the negative gearing so-called pie. Well, it’s not right. In fact, most people who access negative gearing are in fact middle income Australians. The second thing is, it is always better to earn a profit then to make a loss, right. Negative gearing means you’re making a loss on an investment and offsetting it against your primary income. So, I would just say to people, or some of the commentators and others, negative gearing is actually not the best outcome for an individual. It is far better that they have property that makes a profit and I’d rather them pay tax on the profit, which is fine, than having a loss and gaining basically capital gain. Now the second thing is, there are a large number of properties with negative gearing that are all, obviously, all of them would be rental properties. If you were to remove negative gearing you would see an increase in rents and I think that hurts lower income Australians who may be renting those homes. In turn, right, in turn, the Government would then need to increase the rental subsidies, particularly for welfare recipients and that would be a direct cost to the Budget on higher rents.
PRESENTER:
On welfare…
TREASURER:
People haven’t necessarily thought it through.
PRESENTER:
You, Canberra’s coming out with a lot of rhetoric about cracking down on welfare recipients, what are you contemplating?
TREASURER:
Well, as Scott Morrison has been saying, and I understand you are talking to him a little bit later about nanny…
PRESENTER:
Yes we are.
TREASURER:
I think that’s a terrific initiative. You know, we are about increasing, giving people the chance to work and giving them greater flexibility with their childcare through a nanny program is a great way of doing it. Particularly for shift workers…
PRESENTER:
But tell us about the clampdown that you’re proposing?
TREASURER:
Look, we are saying there needs to be integrity in the welfare system [inaudible]. We’ll have more to say about it in the Budget so I can’t pre-empt it but, if someone is rorting the system, then they should be caught. What we’re going to be doing is investing a lot of money in new infrastructure, computer systems and so on that ensures, that people only receive the money that they are properly entitled to, and that they are not double-dipping, or they’re not engaging in behaviour that would normally prevent them from getting that entitlement.
PRESENTER:
Joe, on the business of foreign investment, can you just define what foreign investment is? Because one always assumes that when you say the word investment it means you bring in money from outside, you grow a business, you employ more people, you have a greater output for which there is a tax payable, so everybody wins. But when somebody comes in and buys a property, and through price transfer is able to send everything back and not pay any. Your dear colleague Bill Heffernan has educated us well on this. Are we going to do anything about that?
TREASURER:
Well, yes we are. We’re cracking down on ensuring that people have to comply with the law. Now, I announced the first divestment order by the Treasurer in some years, Labor never did it, on a property in Sydney which made a lot of headlines including here in Adelaide. Because it was, a foreign national had bought an existing property. Foreign nationals are not allowed to buy established property, they have to buy new property, unless they get permission and they rarely get permission. So, the reason why they have to buy new property is, if they have to buy new property they create jobs when the property is built. So it does create jobs for locals and we want those jobs, particularly given the mining boom has come off, and you’re not seeing the same number of construction jobs in mining. We want them to move into other areas of construction. Housing construction is an important area or commercial property construction, and that’s where foreign investment does work to our great advantage.
PRESENTER:
You talk a lot about older workers, will there be anything in the Budget to encourage older employers to keep them in the workforce [inaudible].
TREASURER:
Yes, yes it’s something we, something we’re actively…
PRESENTER:
You are?
TREASURER:
We have a jobs package in the Budget and part of that jobs package will be focused on…
PRESENTER:
Because changing people’s attitudes to age discrimination is a long term…
TREASURER:
[inaudible] There’s a few things we’ve got in play. But you know, Leon, I think it is a hugely important issue. Giving people the chance to work longer. Can I give you, have I got time for a little story?
PRESENTER:
One little, well I don’t want to blow the news out at 10 o’clock and I want to try and get as much out of our time together.
TREASURER:
Okay.
PRESENTER:
But look, there’s another point here, and that is that South Australia at the moment gets over $1.30 per dollar for GST. I know that the arrangements for GST are going to stay pretty much the way they are. However, as you know, this state is in a lot of trouble economically and I know you talk about retail figures…
TREASURER:
Well, I’m more positive about it, I’m more positive about it Leon. I think too many people here are down on South Australia, I’m actually far more positive about South Australia.
PRESENTER:
Because? Because?
TREASURER:
Because I think there’s great export opportunities. I was given a packet of chocolates this morning…
PRESENTER:
I know, see I won’t give you sugar because you don’t need it [laughter]
TREASURER:
But I walked out of the place, the studio where they gave me the chocolates, and found out that that company, that South Australian company, exports to ten different countries. I was on the street down here, everyone’s giving me fruit in South Australia. I was on the street down here and Mr Tucker gave me some of his Tucker’s Biscuits and he exports as well. When you look at the wine exports through the free trade agreements with China, Korea and Japan, we are now, 60 per cent of Australia’s exported wine comes out of South Australia, huge opportunities.
PRESENTER:
Can I just make a very polite suggestion?
TREASURER:
Of course you can.
PRESENTER:
We have some great exporters here…
TREASURER:
Fantastic exporters and innovators.
PRESENTER:
[inaudible] agriculturalists, but you know what, if we allow stuff to come in under-priced that’s subsidised by Europe and other countries, we do them a terrible disservice.
TREASURER:
[inaudible] But, in this case we are removing the taxes on our exports to these countries, that’s the thing. We are removing the taxes. Even when they export to us we are removing the taxes. So a Toyota Corolla is now $1,000 cheaper, they’re about $16,000, $1,000 cheaper as a result of these agreements that we’ve signed.
PRESENTER:
There’s only one [inaudible] though, you need people to earn money to afford to buy them for the less $1,000 that you’re talking about.
TREASURER:
The best way, you know, I grew up in a small business family. My father came to this country and setup a corner store. He said the best thing he can do to earn more income is to have more customers. So, for a South Australian perspective which has a great story to tell in manufacturing, a great story to tell in agriculture and exports, all sorts of things. The more customers we can get for the businesses of South Australia, the more prosperity you’re going to see here.
PRESENTER:
Well Joe, I won’t give you food but I will give you some Windex to make things perfectly clear when you do the Budget. Because a lot of people don’t understand how spending has gone out. Before you were in opposition you were saying oh, you’re spending, spending…
TREASURER:
And it’s true, and it’s true Leon. It’s absolutely true. The spending trajectory that we still have is unsustainable.
PRESENTER:
So this Budget is going to try and rein that in?
TREASURER:
We continue, it’s not going to happen in one event, it’s going to take years. But we actually need, you know, we need the support of others. You can speak to your mate Nick Xenophon [laughter]. Yeah, I mean seriously, he’s your mate…
PRESENTER:
But you just said he’s not the Government.
TREASURER:
Well, no, speak to Nick Xenophon because you know, if he cares about Australia, if he cares about South Australia, he’ll help us to reduce the spending burden that was left by the previous Labor Government.
PRESENTER:
Alright, thanks for coming in.
TREASURER:
Any time.
PRESENTER:
Good luck, we’ll see you soon, Joe Hockey.