PRESENTER:
Joe Hockey is the Federal Treasurer. On Tuesday night, he presented his second Budget since the election of the Abbott Government. He has been in Melbourne at a fundraising breakfast this morning and joins me in the studio this morning. Mr Hockey, good morning to you.
TREASURER:
Good morning, Jon.
PRESENTER:
The paid parental leave double dipping argument has taken an interesting twist overnight. Apparently employers are already restructuring schemes to, excuse the pun, skirt around the rules.
TREASURER:
Well, that would be regrettable if they are, because a good employer offers a fair dinkum paid parental leave scheme to their employees, and the government scheme is meant to be a safety net in particular for small businesspeople who can’t afford to offer a scheme but their employees should get paid parental leave, at least the minimum wage, and $11,500 over 18 weeks. So…
PRESENTER:
But by saying you’re not allowed to double dip, immediately creative accountants and financial officers in various employment practices are saying, well, we can create it now as a back to work bonus, and you can get the government scheme and then come back to your employer’s scheme rebadged and rebranded under another name.
TREASURER:
Yeah. Well, look, it’s something we will have a look at, but if – a good employer will offer fair dinkum paid parental leave to their employees, like the ABC does, like the Government does, like many businesses do, and if they change the scheme to try and scam the government and scam taxpayers, well, I mean, that reflects on them as much as anything else, and…
PRESENTER:
You – why do you characterise it as a scam?
TREASURER:
Well, because what they’re trying to do is utilise what is meant to be a safety net and changing their own scheme for their employees, which should be at replacement wages.
PRESENTER:
But…
TREASURER:
So it’s not full replacement wages, our scheme. I mean, it’s targeted at those on lower incomes in particular.
PRESENTER:
But your language of using the word scam, which lines up with fraud and rort which Scott Morrison was saying. It’s as if people are doing something they shouldn’t be doing. In fact, this is people’s entitlement.
TREASURER:
Well, I’ve always seen paid parental leave as something employers should give, but when all employers weren’t doing it, we offered a new paid parental leave scheme which was a fair dinkum one at full replacement wages for every person in the community. The Labor Party opposed that strongly because they – which I didn’t understand, and I still don’t to this day – but we’ve also found that people, for example government employees, are not only getting a replacement wage paid parental leave scheme as an employee of the government but they’re also going down to Centrelink and getting another paid parental leave payment, and we think it’s wrong for people to get both.
PRESENTER:
Can you explain to me how come for the last couple of years Tony Abbott has been absolutely committed to a solid gold parental leave scheme that was unaffordable and unsustainable according even to your business…
TREASURER:
Well, it was a replacement…
PRESENTER:
It was so lavish – it was unsustainable according to your business supporters – that now you’ve left alone self-funded retirees and some of their lavish and generous concessions, you’ve left alone negative gearing for landlords and their generous concessions, but you’re literally describing as fraud, rort, and all the rest of it, women going back to work.
TREASURER:
Well, there’s about five questions there. I…
PRESENTER:
I don’t understand your priorities.
TREASURER:
No, well – well, our priority is, when we spend taxpayers’ money, we spend it carefully, and in the paid parental leave scheme the government has at the moment, it’s quite simple: we’re saying if your employer is offering a scheme that pays more than $11,500 over 18 weeks, then that’s terrific, your employer should do that, and that’s your income. If you receive less than $11,500 over 18 weeks, the government steps up to the plate, and we will top it up to that amount of money. Now, I think that’s pretty good. I think that’s pretty fair [inaudible] but by the way, we’re going to put an extra 11.5 – sorry, $3.5 billion dollars into childcare, which is what a lot of parents want. And plus we’re putting an extra nearly $1 billion dollars into education for children aged four, which was unfunded by the previous government. So we’re spending all this extra money, and we’re trying to get the balance right, saving on the one hand and spending in other areas on families to help them get through.
PRESENTER:
So why leave all these other generous areas that government [inaudible]…
TREASURER:
Well, can we go through – yes, can we go through those individually…
PRESENTER:
… like self-funded retirees? You can have millions of dollars in super. You can be a corporate high flyer or a highly paid medical or legal professional or whatever it might be, have millions of dollars tucked away, and the government’s not touching it.
TREASURER:
Well, what happened was – I mean, as you know, serious work on superannuation started under the Keating Government, to Paul Keating’s credit, in 1992, and there were a whole lot of different arrangements then. So over the years, there are some people that under the laws that existed under previous governments were able to put more and more money into their super. A lot of people couldn’t, by the way. A lot of people couldn’t. I mean, my parents had a small business. They couldn’t – they never knew what superannuation was. So therefore, under the old rules, they accrued a lot of money in some cases, a handful of cases into super, which you cannot accrue under the laws today, all right? So if we were to change the laws, we would have to be retrospective. We would have to go back and say, look, the wealth you accrued and the superannuation you accrued under the laws in those days, we’re going to go back and tax. Now, I mean, that needs to be very carefully considered. It’s a serious, serious policy issue. And we’ve said, no, we are not going to tax – touch superannuation with new taxes, and why? Because at the moment, for most people with superannuation, they’ve actually got lower returns than they were expecting because the interest rates are so low. So they’re feeling the pain of, you know, very low returns on their bank accounts and so on…
PRESENTER:
Indeed they are.
TREASURER:
… and imposing a new tax on them like Bill Shorten wants to do is not the answer.
PRESENTER:
But people with a couple of hundred of thousand dollars – not millions – are also experiencing lower returns.
TREASURER:
Yeah.
PRESENTER:
And they’re experiencing a squeeze from the government that the people with millions are not.
TREASURER:
Well, no, they’re not experiencing a squeeze from the government, because actually if you have your own home and you’re a single pensioner, we’re increasing, under our pension changes, the amount of liquid assets you’re able to have and still remain on the full pension. So we’re actually helping people with fewer assets and ensure they get a full pension rather than a part pension. So that’s one of our…
PRESENTER:
But you’re cutting down…
TREASURER:
We’re cutting down on people at the top end.
PRESENTER:
Of course.
TREASURER:
Who might have $1.15 million dollars of liquid assets in addition to their home. They’re not going to get the part pension any more.
PRESENTER:
So you are changing what people will get who are within the realm of government reach because of pensions, but people who are beyond it…
TREASURER:
Which is very few Australians. Beyond – I mean, because 80 per cent – it’s around 80 per cent of Australians over the age of 65 are either on a part pension or a full pension, so you’re saying go after the people with a lot of assets. I’m saying that’s all well and good, but think about the fact that in many cases it would be retrospective taxation. And they complied with the laws that Labor put in. So now to go back and get them – and Labor wants to get everyone with more than $75,000 income per year out of their superannuation with a new tax that no one ever saw coming.
PRESENTER:
It’s not much of a principle, is it, to say there’s only a few rich people so we will leave them alone?
TREASURER:
No, no, no, but – but you’re never going to repair the Budget by just going after rich people. No matter what happens. The Budget repair needs to be everyone putting in an effort, and if we’re taking some of those higher income people off the part pension and they’re relying on their superannuation, well, they should be entitled to do so, because superannuation is their money, it’s not ours. It’s their money.
PRESENTER:
You theatrically and flamboyantly waved some papers at us during your Budget speech about the offshore tax for multinational corporations, Google, Apple…
TREASURER:
I wasn’t theatrical or flamboyant…
PRESENTER:
Google, Apple, News Corp, Westfield, Microsoft, Ikea. The list goes on and on. But when we look at…
TREASURER:
That’s your list.
PRESENTER:
When we look at the Budget papers, revenue generated from getting tax from those corporations, asterisk.
TREASURER:
Yeah.
PRESENTER:
Nothing there.
TREASURER:
Yeah. You know why? Because we’re not going to count money that we haven’t collected.
PRESENTER:
Or is it that you know that it’s all just a bit of a sop to the headlines; you don’t expect to get anything.
TREASURER:
No, no. No, no. Not at all. We do. The first thing is there’s this exotic thing called a Double Irish Dutch sandwich…
PRESENTER:
Yes.
TREASURER:
… and that’s where some – we’ve identified 30 companies. So when I became the Treasurer, I sent the Tax Office into these companies. I said go out and find out what the hell’s going on with a number of these – not all the ones that you mentioned, but the ones that are obvious…
PRESENTER:
You do want to get some money from them don’t you?
TREASURER:
Of course I do. But hear me out.
PRESENTER:
But you can’t solve the tax problems by hitting the rich.
TREASURER:
And the money will go through – what they’ve been doing is transferring profits to Singapore, then to Ireland, the Netherlands…
PRESENTER:
[inaudible] transactions…
TREASURER:
Exactly. [inaudible]. So what we’ve done is we’ve said, okay, we now know that you’ve transferred income offshore, and we know you’ve transferred profits offshore, but the taxable amount: we’re struggling to find out how much that is.
PRESENTER:
Yes.
TREASURER:
And we need to be embedded in your business, and we are introducing new powers that allow us to go into your business potentially worldwide – which is the first in the world in this instance, right? – worldwide, and identify what profits should have occurred in Australia and what taxes should have occurred in Australia, and our penalties are significantly larger, in fact twice the amount – you have to pay 100 per cent of what you owe, plus a 100 per cent penalty, plus interest, which is far more than what's known as the Google tax in the United Kingdom. And we are leading the world. I’ve done this. I laid it on the floor of the G20 in Washington weeks ago. I said, I’m working with the Chancellor of the Exchequer in London. We are going to pincer to these companies. And the reason why I’m not going to put a number on it is, firstly, we’re trying to identify exactly how much it is at the moment, and we need new powers to do that. But the second thing is, I’m not going to make the mistake of my predecessor and say, “I’m going to get so much – so many billions out of these companies,” like he did with the mining tax. And then people say, oh well, you know, you can go and spend that. No. Until we collect it we’re not going to put a number on it.
PRESENTER:
18 minutes past 9. Joe Hockey, Federal Treasurer in the studio this morning. What have you got against rail? Almost no new funding and almost no ongoing funding in rail infrastructure, but what infrastructure funding there is, is going almost entirely to roads.
TREASURER:
Wrong. That’s wrong, and I will tell you why. Because we have an asset recycling program which I announced in last year’s Budget of $5 billion where a State Government or a Territory can sell productive assets and use the proceeds to go into, for example, rail and we will give them a 15 per cent bonus payment.
PRESENTER:
Okay [inaudible]…
TREASURER:
Well, hang on [inaudible]…
PRESENTER:
Where’s the infrastructure Prime Minister? Remember that?
TREASURER:
Well, yes. $50 billion of infrastructure Prime Minister. And it’s rolling out, and it was meant to roll out with East West here, but…
PRESENTER:
[inaudible] project.
TREASURER:
Well, no, that’s your view, but wait a second. The ACT Government, which is a Labor Government, was the first to sign up to our program, and we’re putting money into the light rail through the middle of Canberra through this program.
PRESENTER:
And you refuse to put money into urban rail in Melbourne; why?
TREASURER:
No. Well, we’re in discussions with the Victorian Government about…
PRESENTER:
Kevin Rudd allocated $3 billion to Melbourne Metro and then Tony Abbott and Denis Napthine and Ted Baillieu, the State Premiers here, converted that to a road tunnel project investment there. And now the current Labor Government were elected on an unambiguous mandate to go back to public transport. Why? Not funded.
TREASURER:
Well, if the government keeps changing its mind in Victoria, whether it’s Liberal or Labor or anything else, the bottom line is we committed and we went to the election saying we were going to put money into East West. We stand by that absolutely. It’s in my Budget papers as a contingent liability.
PRESENTER:
Do you respect the will of the Victorian people at the election last year?
TREASURER:
Well, the Victorian people –the Victorian people willed us, to use your term, at our election, to put the money into East West and we’re honouring that commitment. And, in fact, we’re honouring a written commitment with the Victorian Government – a written commitment with the Victorian Government. Whether it’s Liberal or Labor, it was a written commitment with the Victorian Government. We actually gave them, as you know, $1.5 billion to get on with it.
PRESENTER:
So what's the point of state governments if, in fact, you're not going to take any notice of the policies they're elected upon.
TREASURER:
Well, if they change their mind and change their mind …
PRESENTER:
Well, no. This government has been consistent.
TREASURER:
Well, no. Hang on. This government…
PRESENTER:
It was elected and Tony Abbott said it was a mandate – this was an election referendum, effectively, on the East West tunnel and the Victorian people voted.
TREASURER:
Well, then I would argue when we were elected they voted for us to put $3 billion into East West, as well. So the bottom line is we want things to be built, Jon, all right. I’m prepared and the Prime Minister has said we’re prepared to talk to the Victorian Government. And particularly under the asset recycling programs – they sell the Port of Melbourne and recover it. We will give them a 15 per cent bonus payment. And as long as the projects are productive infrastructure then we will put the money into it.
PRESENTER:
What have you got against urban rail?
TREASURER:
Well, it’s just not our core business.
PRESENTER:
All right. Why, though?
TREASURER:
Well, because…
PRESENTER:
If you want to ease congestion in Brisbane, Sydney and Melbourne it’s urban rail that does it. Heavy rail is the only way to move a lot of people quickly, full stop.
TREASURER:
Well, I’m not a town planner.
PRESENTER:
Take it from those who are.
TREASURER:
I feel like it’s Groundhog Day because you and I have talked about this before. To start determining rail routes and rail stations out of Canberra is not the right response from Melbourne. I think Melbourne should do it and the Victorian Government should do it. And if they want help with roads, we will help with roads.
PRESENTER:
Why only roads? Why?
TREASURER:
Well, because – because it’s where we’ve always been prepared to fund. In fact, the national highways the Federal Governments have funded for years. That’s what Federal Governments have done. It was the previous Labor government that was reaching into rail and then started…
PRESENTER:
Kevin Rudd put $3 billion as a Federal Government into rail, why can't an Abbott Government put money into rail if it wants to?
TREASURER:
What I’m saying – we are putting money in through the asset recycling program.
PRESENTER:
No. That’s chicken feet compared to what was otherwise available.
TREASURER:
Chicken feet.
PRESENTER:
It was $3 billion to make sure it got done and we’ve lost five years.
TREASURER:
Well, you're pushing the case for one project over another. You're entitled to do that. I’m saying we’re prepared to deal with what's before us and if the Victorian Government is saying they're selling the Port of Melbourne and they're redirecting proceeds into Metro Rail, terrific. We will give them a bonus payment along. Provided the numbers stack up for Metro Rail, fine.
PRESENTER:
And while we’re at, the Victorian Treasurer on this program on Wednesday said that Victoria’s share of infrastructure spend is now down to 12 per cent against 30 per cent of population and 36 per cent…
TREASURER:
Well, hang on. We allocated $3 billion for East West Link. They…
PRESENTER:
Victoria’s share now down to 13 or 12.5 per cent.
TREASURER:
Jon, we allocated $3 billion for East West Link and they tore up the contract and spent $1 billion on a road never to be built. And…
PRESENTER:
Victoria’s share of significant infrastructure balanced against population – off a cliff.
TREASURER:
Does it show East West?
PRESENTER:
Off a cliff.
TREASURER:
Does this show East West?
PRESENTER:
That's including East West. Off a cliff. I believe so.
TREASURER:
Well, I don’t accept it, because we’re prepared to do a deal with Victoria on Metro, we’re prepared to do a deal on a range on things. But the bottom line is they just tore up 7,000 jobs. When they cancelled East West they tore up 7,000 jobs, and we gave them – we actually gave them the money for those jobs and they tore up the project and spent $1 billion. That was the worst piece of waste I’ve ever seen in politics in 20 years.
PRESENTER:
They argue it was worth spending to get out of a lousy contract. Let’s not re-debate that. Tony’s tradies, they're now being called – the $20,000 brought forward tax depreciation that you announced the other night.
TREASURER:
Yes.
PRESENTER:
But already we’re seeing art galleries saying, “Come in and buy some art with your $20,000.” And there’s a quote in the Financial Review today from a financial planner saying he had a call from someone saying, “Can I buy a Harley and say I’m using it to round up the sheep?”
TREASURER:
You know, all of the ABC interviews I do, people suggest that somehow small business wants to rip off everyone. I mean, that is just ridiculous.
PRESENTER:
The Financial Review I’m pointing to.
TREASURER:
Well, I mean, it’s the Financial Review.
PRESENTER:
It’s not the ABC making it up.
TREASURER:
No, but I’ve been asked this question by a number of interviewers. The bottom line is, Jon, it’s their own money, so they can – they would be claiming depreciation at any rate, okay, but it would be over a number of years.
PRESENTER:
Over three or four years.
TREASURER:
Yes, that’s right. So what we’ve said is instead of claiming it over three or four years [inaudible] and it helps with your cash flow.
PRESENTER:
Yes.
TREASURER:
But it’s not 100 per cent return on the money, because it’s just an offset against their tax.
PRESENTER:
Widely misunderstood.
TREASURER:
That's right.
PRESENTER:
[inaudible] go and buy some art.
TREASURER:
Well, they’ve still got to pay for it, and the question is there are rules by the Tax Office about the use of art and various other things, right. You have to have it on public display and a range of other things, so, I mean, you know, it’s not as if small business has lots of money to waste. I can tell you they want to actually grow their businesses. I mean, I walked into a coffee shop this morning at 6 am and, you know, there’s three or four cousins, uncles, you know, all working in the kitchen and the front and they want to buy a new fridge or they want to buy, you know, new seating to help to grow their business. Terrific. If they want to buy a car that’s going to be good for deliveries and home catering and all that sort of stuff, terrific. That’s what we want to do. We want jobs created, Jon. We really do. And try and lift employment – and we’ve got a number of measures in that regard.
PRESENTER:
Bill Shorten in his speech in reply yesterday – you were in the Parliament cheering him along, I noticed, at various times. He offers bipartisan support to reduce small business tax by a full 5 per cent. Will you work on that project?
TREASURER:
Well, firstly, I welcome his, you know, support of small business. I mean, that’s absolutely terrific. And also we welcome the fact that they're supporting our package which we announced on Tuesday night. And good credit to them for supporting our package. The things is, two-thirds of small businesses are not incorporated. They're not companies. They're sole traders or they're partnerships and so on, so when we carefully crafted the package on Tuesday night we had a 1.5 per cent reduction in company tax for one-third of the small businesses that are companies, but then we had up to $1000 5 per cent tax rebate for all the others that are not incorporated.
PRESENTER:
Understood. He…
TREASURER:
Bill Shorten didn’t have that.
PRESENTER:
But he’s offering this tiny little opening for some bipartisanship.
TREASURER:
Well [inaudible] but the thing is he can't – it would be unfair if – and we thought carefully about this, this year. It would be unfair if you give some businesses – small business because of their structure a massive tax cut and not others.
PRESENTER:
And not others.
TREASURER:
That's right. The two – and that would be –that would make the playing field unfair.
PRESENTER:
[inaudible] going to put a counter-proposal in, but are you going to accept…
TREASURER:
Well, you’ve got to find the money.
PRESENTER:
Will you work on the bipartisanship part of it?
TREASURER:
Well, you’ve got to find the money. I mean, if Mr Shorten will [inaudible] we’re prepared to talk, but the bottom line is it can't create an unlevel playing field where you're giving some small businesses a 5 per cent cut in their tax – in their company tax and all the other small businesses – two-thirds of them – you know, 1.5 million small businesses get nothing. And we don’t think that’s fair and he hasn’t thought that through.
PRESENTER:
Two other quick things. An independent statutory body for infrastructure investment in Australia: interested or not?
TREASURER:
Well, we’ve given significant powers to – and resources to Infrastructure Australia, and that’s a significant improvement on what happened last time, because Albo – I like and respect Anthony Albanese, who is the previous Infrastructure Minister. He had Infrastructure Australia. He said it would be independent. It never was. So we’ve made it more independent. It looks at all the major projects. But I don’t…
PRESENTER:
It’s a statutory body.
TREASURER:
The thing I’m always wary of is setting up a new independent body, right, where you just give them money and they determine where the money goes, because ultimately, as a person elected by the people of Australia, I’m accountable for that. And if I haven't got control over the where the money goes…
PRESENTER:
So it’s about control.
TREASURER:
Well, because I’m accountable through the ballot box. I’m accountable. If you set up a body that has no accountability – none – no shareholders, no elections, no nothing – and they're spending billions and billions of dollars of taxpayers’ money, I instinctively don’t like that.
PRESENTER:
It might mean stuff actually gets done, because it’s freed up from the political cycle.
TREASURER:
Well, hang on. It is getting done.
PRESENTER:
Badgerys Creek airport – no, it’s not.
TREASURER:
Well, then you would get East West Link, wouldn’t you?
PRESENTER:
[inaudible]
TREASURER:
You would get East West.
PRESENTER:
You might, but at least it would get done. Everyone knows that one day that’s going to get done.
TREASURER:
Well, there you go.
PRESENTER:
It’s a matter of priority…
TREASURER:
You can't have it both ways. You can't say there’s a mandate to get rid of East West Link on the one hand and on the other hand say you need an independent statutory body that does what it wants without any accountability.
PRESENTER:
No, not what it wants. What it deems to be, after hearing everybody [inaudible] we state our case.
TREASURER:
I’ve got you here.
PRESENTER:
No, not at all.
TREASURER:
I have. You can't have it both ways. You said that people through a mandate – a little bit earlier, you said that people through a mandate decided not to have East West. And on the other hand you're saying you need to have an independent body that does not respond to that mandate.
PRESENTER:
An independent body that’s given jobs to do and then is freed up from the political cycle. But moving on very quickly, writing off HECS debts [inaudible] was the other big announcement that Bill Shorten unveiled in his reply last night. Interested or not?
TREASURER:
I don’t know how it would work, and I think he has got his numbers wrong. We’re having a look at it, because he said – I think he mentioned 100,000 – 100,000 people that have HECS debts are going to have them written off by the government. Apparently it costs just around $300 million. Instinctively, I think that number sounds wrong, but we are getting more details on that at the moment.
PRESENTER:
As an idea, though?
TREASURER:
Well, if you write off – how does it help? I mean, how does it help to write off existing peoples’ debts? How is that going to help to provide incentives for the future? And, fundamentally, you're picking and choosing what areas of endeavour are worthy or are not through a loan scheme, and I just think that’s – it sounds to me as a little odd. I don’t want to just shoot down everything, but I just – I think you’ve got to – you’ve got to have a plan and you’ve got to work through that plan, and I don’t think Mr Shorten has thought these things through.
PRESENTER:
Very interesting. I’ve run way over time. Thank you very much, though, for your responses this morning.
TREASURER:
Thanks, Jon
PRESENTER:
And we undoubtedly will get another chance at some time soon to talk through some of the big issues of the Australian economy.
TREASURER:
Absolutely. I love coming here. Thank you.
PRESENTER:
I can see that.
TREASURER:
Well, I do. I do. I really do. I think you're too hard on yourself, Jon.
PRESENTER:
The audience sometimes think I’m too hard on guests like you instead.
TREASURER:
No, no. I enjoy coming here. Thank you.
PRESENTER:
Well [inaudible] so there you go. Joe Hockey.