FRAN KELLY:
Treasurer, welcome to Breakfast.
TREASURER:
Great to be with you, Fran.
FRAN KELLY:
Treasurer, we will come to your Budget in a moment. First to the broader economy: tomorrow’s GDP figures expected to show growth above three per cent – pretty strong, but economist Saul Eslake is quoted in the Fin Review today showing the figures will also reveal what is known as an income recession where profits and wages hit hard by falling terms of trade and in a negative territory for the past two quarters in a row. How worrying for you as Treasurer, is an income recession?
TREASURER:
Well, the fact is, you have got to keep focused on jobs and growing the Australian economy and you are right, when it comes to real GDP growth, Australia is actually close to trend. Now, we will see what the numbers are tomorrow, particularly in relation to nominal growth, which is basically the question of what our nations income is. Now, iron ore represents one fifth of our exports but in the last year and a half, the value, on a tonne basis of those iron ore exports has approximately halved. So, that has an impact on our nations income. So, Saul Eslake is right in that respect. So, it is all the more important Fran, that we stimulate domestic growth by continuing to roll out our Economic Action Strategy on infrastructure, our Economic Action Strategy involving the free trade agreements, and our Economic Action Strategy to put the Budget on a sustainable basis.
FRAN KELLY:
I want to come to your Budget in a moment but – well, let’s come to it now in fact, because all of this – falling incomes, falling profits, falling wages, means declining income tax; how much more difficult does it make your job when coming to MYEFO? It is going to be with us within two weeks, yes, MYEFO?
TREASURER:
Yeah it will be within two weeks but it is not a time for panic. It is a time for a rational approach to the challenges that are before us. When we came into Government, we laid down a plan to get the Budget back to a sustainable surplus. We are absolutely committed to that plan. The only impediment is Mr Shorten, who is now opposing $28 billion of initiatives in the Budget. So, he actually wants to make the Budget far far worse than its starting position. Now, it is time for Mr Shorten to meet with us, to come to the table and accept that he has a responsibility to help to repair the mess that he created and instead of even opposing savings measures that he initiated, he should start supporting the Budget repair task that we have.
FRAN KELLY:
Alright, we will come to Mr Shorten in just a moment but to stay with you; if it is not a time for panic, the ERC – otherwise known as the Razor Gang is meeting this week, as I understand it, ahead of MYEFO…
TREASURER:
Well, it always does Fran…
FRAN KELLY:
So, presumably it is looking for savings, so there will be more savings announced?
TREASURER:
Well, Fran we will do everything we can to strengthen the Australian economy. We are determined to have, not only a good Christmas but a good new year. There is a lot of good evidence around that the Australian economy is back on track and is going to strengthen…
FRAN KELLY:
What is the evidence because consumer confidence is still [inaudible]
TREASURER:
No, I’m sorry that is a myth from Labor, that is a…
FRAN KELLY:
No, I am looking at the Westpac surveys [inaudible]
TREASURER:
No, I am sorry I tabled in Parliament, the latest consumer confidence data and it illustrated the fact that consumer confidence is now at its average level from 1990, which is, above average.
FRAN KELLY:
Well, Bill Evans said [inaudible] said that it was four per cent below where it was in the GFC; the longest running [inaudible]
TREASURER:
Well, no I am sorry, I am happy to give you the data – the authoritative data on consumer confidence, which shows that consumer confidence is at the long-term average level since 1990, business confidence is at the long-term average levels since around that time as well. Residential construction is at record levels, retail sales expectations are at record levels over the last five years. We are now seeing – under us – this year, job creation at twice the speed, Fran, that it was last year. More than 12,000 jobs created every month. Last year it was around 5,000 jobs created every month. So, there is real momentum in the economy. The only road block is the attitude of the Labor Party to helping to fix the Budget mess that they created.
FRAN KELLY:
Now, if the road block is the Labor Party, or the Senate more broadly, the Prime Minister said yesterday that the Government is still committed to Plan A through the Budget but you just can’t sit there on Plan A and hope that Bill Shorten is suddenly going to come to you and say, ‘yeah okay’; where is there room for the Government? What is your Plan B?
TREASURER:
Well, let me just start, we had more than 400 measures in the Budget, 75 per cent of them have already gone through the Parliament.
FRAN KELLY:
$28 billion worth have not.
TREASURER:
Yeah but Fran a vast chunk of the Budget has already gone through.
FRAN KELLY:
[Inaudible]
TREASURER:
Labor hasn’t helped anywhere, right. I mean Labor…
FRAN KELLY:
That it was Tony Burke said, that Labor supported $20 billion worth of savings.
TREASURER:
Labor, you would think support supply; you would think the Labor would help support supply, and you would expect Labor to actually back their own savings initiatives. Can I give you one good example, Fran? Labor, last year, said they were concerned that the 20 largest companies in Australia were claiming an R&D tax concession and that was worth $1.1 billion. So, that was hurting Australians - $1.1 billion. They said they wanted to get rid of that R&D tax concession for the 20 biggest companies. They have now said they won’t back that, they won’t back that. They announced it. They won't back the savings measure. And you know why? Because Kim Carr is a Senator in the Labor Party that has control over Bill Shorten and Bill Shorten's too weak to stand up to his own Shadow Minister. Why else could you expect – on what planet would you expect that Labor would want to defend the 20 largest companies in Australia with a tax benefit that they themselves were [inaudible] at in Opposition but won't back now?
FRAN KELLY:
But Treasurer, in terms of your bigger problems, I'm not sure that the voters are attuned to an R&D credit [inaudible].
TREASURER:
It’s all money Fran, every dollar counts, every dollar.
FRAN KELLY:
Absolutely but they are also concerned, according to the polls that what they see, and remain seeing, as an unfair Budget. There is no sign in the Newspoll today that that has changed. Are you going to address that perception and how?
TREASURER:
Fran, how is it fair that Labor wants to give a tax concession to the 20 largest companies in Australia that they were appalled at 12 months ago to. How is that fair?
FRAN KELLY:
I’m not here to argue Labor’s case [inaudible]
TREASURER:
No, no, but it is a reasonable point. No, no I am sorry. How is it fair? Because we want to do it. That's fairness. We want to do it. We want the 20 largest companies in Australia not to get this tax concession and that is part of the balance that you have to take in the lead-up - in a Budget, getting it right. I read an article yesterday that said the Budget was unfair. They failed to mention that we introduced a Deficit Reduction Levy on higher income Australians. They forgot to mention that, right? They forgot to mention the fact that ultimately a huge chunk of income tax is paid by higher income Australians and there are a whole range of measures where we were reducing entitlements for higher income Australians in the Budget. They forgot to mention that.
FRAN KELLY:
Treasurer, doesn't that highlight then the fact that you have got a problem with your messaging? If the voters still see it [inaudible] and you say it is fair, that message has not got across.
TREASURER:
Fran, we endeavor to do our best without spending money on advertising but you know, the fundamental problem is that there is not a general agreement in the Senate that there would be bipartisan support for fixing the mess that's been created.
FRAN KELLY:
There is not that agreement and that's your problem?
TREASURER:
I even heard Mr Palmer saying yesterday, ‘Don't worry about debt, that's okay’. Well, that's an interesting and novel approach but it’s not right because he unfortunately does not understand some of the economic challenges we face as a nation.
FRAN KELLY:
Will you develop a Plan B [inaudible] on this notion of fairness, which might do something like, as the PM suggested, tweak his preferred Paid Parental Leave Scheme – change that? And also, maybe do something about the concessions – the tax concessions on superannuation?
TREASURER:
Well, Fran, we said we weren't going to change superannuation.
FRAN KELLY:
You said you weren't going to cut the ABC Budget, too.
TREASURER:
Well from our perspective, we want Australians to spend money; we want Australians to spend money. That is hugely important. We want them to have the confidence to go out there because household consumption is actually one of the biggest drivers of economic growth. So, we want Australians to have confidence. We want Australians to go out there and spend for Christmas. Don't let Santa down, go out there and spend for Christmas.
FRAN KELLY:
You are listening to RN Breakfast. It’s a quarter to eight. Our guest is the Federal Treasurer, Joe Hockey. There is one message: get out and spend for Christmas. Your Party Room will meet for the final pre-Christmas meeting today before the MPs head back to their electorates. Will you address your colleagues to reassure them that you have a plan to get out of this Budget mess?
TREASURER:
Well I will, Fran, and I don’t accept that it is a Budget mess, Fran. I mean frankly, when 75 per cent of the initiatives have already gone through, and when Labor was leaving initiatives in their Budget papers that were lasting for years and didn’t pass through, and in fact were explicitly rejected by the Senate, I don’t accept that idea that…
FRAN KELLY:
So, what will your message be to your colleagues?
TREASURER:
Well, that the economy is on a good trajectory; that we have delivered this year. That you know, there would not have been any free trade agreements if we hadn’t of made the hard decisions about industry assistance at the beginning of the year. So, there would have been no free trade agreements if Labor were elected. The Carbon Tax would still be in and people would have higher electricity prices. The failed Mining Tax would still be in and we would have a disincentive for the development of new mines. The fact is there would be no Budget repair task. The fact is, the boats would still be coming. That is all because we have taken the difficult decisions. And yes Fran they are difficult but we are have been elected to make the difficult decisions. It is easy to be popular in politics. It is easy to be popular in politics; to say everything that people want to hear. It is hard in politics to be popular and make the difficult and right decisions at the same time but we are determined to do what is right for our nation.
FRAN KELLY:
And Treasurer, I think it is fair to say that your popularity has taken a bit of hit since the Budget and there was a story yesterday suggesting that the new head of Prime Minister and Cabinet, Michael Thawley is going to be engaged to help to reset the Government’s economic strategy; are you being sidelined?
TREASURER:
Well Fran, given that the Prime Minister and Michael Thawley were just stunned about the article – I mean, this is the sort of rubbish that is written. I would say to people, focus on the outcomes and the outcomes are a stronger Australian economy, a stronger economic growth, a stronger job creation. Fran, I have never been more positive about Australia’s future than I am today. On many fronts, we have a big future as a nation and that is going to help to drive prosperity in the future.
FRAN KELLY:
And can I just ask you one final question before you go. It is a policy issue, it is about spending. The new submarine fleet that was going to be built in Adelaide; it is not sure where they are going to be built. Last night, the Opposition amended the red-tape legislation that would mean that any submarine contract must be put to open tender. Will you comply with that?
TREASURER:
Fran, we are going to do what is right for the defence of the nation.
FRAN KELLY:
Open tender?
TREASURER:
Well, buying submarines is not like going down to the parking lot and buying a whole lot of cars.
FRAN KELLY:
Certainly not.
TREASURER:
They are the most sophisticated and arguably, the most expensive production line outcome in the world and we have to do what is right in the defence of our nation. Within a few decades, 50 per cent of the world’s submarines are going to be located in our region. We also have two of the three biggest ports in the world in our region and we have a greater exposure to a seaborne threat than we have had for many years, with gas pipelines producing our nations income all around our coastline.
FRAN KELLY:
Is any of that an argument against open tender?
TREASURER:
Well no, it is an argument for the very best submarine we can get and there are very limited suppliers and there are a very limited number of suppliers that can actually deliver a submarine to Australia at a time when the Collins-class are being decommissioned. Now, it usually takes 10 to 15 years to build a submarine from development stage to outcome in the water. Labor knew that; the first Collins-class sub is decommissioned in 2026. So, we have run out of time, in a sense, and we need to make decisions now.
FRAN KELLY:
So, no time for an open tender?
TREASURER:
We don’t have time to go through a speculation process. We do not have time for people to suggest that they can build something that hasn’t been built.
FRAN KELLY:
So no open tender?
TREASURER:
No, we don’t have time for that because Labor failed to make decisions, Fran.
FRAN KELLY:
Joe Hockey, thank you very much for joining us on Breakfast.
TREASURER:
Thank you very much, Fran.