PRESENTER:
The Federal Treasurer joins me from Sydney. Mr Hockey, good morning to you.
TREASURER:
Good morning, Jon.
PRESENTER:
What happened to the budget emergency you were talking about during the campaign?
TREASURER:
It is still very much there. When I release the Mid-Year Economic and Fiscal Outlook people will see the true state of the Budget. That will happen before Christmas. When we release the Budget we will show the Australian people how we are going to repair what we have inherited.
PRESENTER:
So $3 billion worth of reversals presumably means $3 billion worth of tweaking or cutting somewhere else from you?
TREASURER:
In fact, of that $1.8 billion was in relation to the Fringe Benefits Tax changes for motor vehicles, which we had already accounted for in our election commitments. Our election commitments actually left the Budget $7 billion better off than what we would have inherited. From our perspective it is always going to be better off. The impact of the changes that Labor announced such as putting a cap on self-education expenses, changing the FBT rules in relation to motor vehicles and a number of other things would have ended up costing far more, probably in the end, then what they were raising. The compensation to people and the impact on the economy would have been significant.
PRESENTER:
The Labor Party campaigned hard on you having hidden spending cuts. Are you ruling out changes to the agenda you laid out as we went to the polls?
TREASURER:
Yes. We have been very upfront, very upfront about our election promises. We have been very upfront about the savings we have put in place to fund those election promises. Labor is even campaigning against them now, which they are entitled to do. For example, we said we would repeal the mining tax and all the spending associated with it. That saves the Budget $13 billion and now Labor is opposing it, even though we have taken that to two elections and sought approval.
PRESENTER:
These are changes to, on a superficial analysis, assisting superannuants with a probably $2 million or more in superannuation creating an income in excess of $100 000. It's the top, what, 1% or 2% of the Australian population?
TREASURER:
The threshold is $100 000. It depends. The Labor Party drew it out to $2 million as to what you would have to have in your account to return $100 000.
PRESENTER:
At a 5% return, yes.
TREASURER:
That is not real. Year to year it varies, the income that people get.
PRESENTER:
Either way, they're well-to-do Australians.
TREASURER:
The income people get varies from year to year. Some years, self-managed super funds may sell an asset and derive some income out of that which may be well above $100 000.
PRESENTER:
Selling an asset doesn't derive income it derives capital?
TREASURER:
The problem has been that when it comes to administration for superannuation funds, it is hugely complex and incredibly expensive to work out how much an individual would earn each year. Portioning an asset in a major superannuation fund with $20 billion, $30 billion, $40 billion under management to that particular individual in order to qualify for that. The feedback we got was that the compliance cost of this initiative well exceeded the $313 million it was going to raise over four years.
PRESENTER:
Can we go back; selling an asset creates capital, not income?
TREASURER:
There might be some drawdown, there might be variations in it. Of course, you are right, if you sell an asset. In a class of a managed fund, they are buying and selling assets all the time, which is helping to generate some of the incomes. You can buy and sell shares in a class of managed funds and the buying and selling and trading of shares helps to generate some income.
PRESENTER:
If you don't tax people with more than $2 million in super, who do you tax?
TREASURER:
Everyone is paying tax.
PRESENTER:
Well the Government needs income. If that's not where you look for the Government to have money to spend, where do you look?
TREASURER:
The fact is, we need stability in superannuation. Where do you look? The best way to grow the revenue of the Commonwealth is to have economic growth. If you have tax policies that actually detract from economic growth, if you have tax policies that actually cause a massive amount of compliance so that people are spending more time filling out forms complying with requirements, then they are actually making the widgets that help to make the money then you actually detract from economic growth. What we have said is that we are cleaning up the mess. Ninety-six announcements dating back to 2001 were left unlegislated by Labor. What I said was; 'we have got to clear the decks.' We have got to give some simplicity and certainty back into the tax system, and that is what we are doing.
PRESENTER:
Yesterday, Leigh Sales tackled you on power prices and this morning the ACCC are out saying 'we'll do our best to try and force power companies to deliver any savings from the abolition of the carbon tax'. But it seems that you can't guarantee anything and gas prices, we're told, are inevitably going to go up because of the overseas contacts and offshore demand for Australian gas?
TREASURER:
I do not want to get into the word games about going up, going down. I will say this. Prices are less than what they would have been because we abolished the carbon tax. It is as simple as that. It is a tax on energy. That's the whole intent. It was meant to increase prices and it did increase prices. What we are doing is we are getting rid of the tax. You have raised the ACCC; I have been advised that the ACCC has been running operational losses for the last four years. I have been advised that this financial year, because the previous Government did not give it any money, the ACCC will run out of money in April this financial year. You asked me about the Budget emergency; every cupboard I am opening has spiders in it. As illustrated by the fact that in a meeting with the ACCC they tell me that they are running out of money in April this year and that they are underfunded for the next four years by over $100 million.
PRESENTER:
And you want to cut the Public Service?
TREASURER:
I want to use the money more efficiently. It does not mean the ACCC could not be more efficient, or any other agency. Coming into Government and you find that government entities are running out of money before the end of the financial year. These are the problems that we have inherited that we are going around carefully trying to fix.
PRESENTER:
Chris Bowen, on AM, said 'well there is absolutely nothing unusual about governments requiring statutory authorities, instrumentalities, government departments to run as lean and tight as they can'. You would require the same?
TREASURER:
Absolutely, so he has been saying for four years they have been running losses. The next four years they are running losses. They have been running down their reserves. They have no reserves left. He thinks okay. He thinks that is prudent management. No wonder they ran a deficit. They thought it was okay. They think it is okay to run operations when you have not actually got any money and you cannot meet your obligations.
PRESENTER:
How do you meet your targets of cutting the Public Service?
TREASURER:
We are, through natural attrition, we said that - twelve thousand through natural attrition. We gave our commitment. We are going down that path. That is what we are doing.
PRESENTER:
But it is public servants who will keep an eye on the power companies to make sure that they do pass on to consumers the benefit of implementing your policy of axing the carbon tax?
TREASURER:
That is why I have to deal with the resources that the ACCC has. If I am giving them a job to do, I have to give them the resources to do that job. Not go down the Labor way, of making all these big heroic promises then not being able to pay for them.
PRESENTER:
Joe Hockey, are you prepared for it to be on your watch that Holden shut shop?
TREASURER:
I hope they do not shut shop.
PRESENTER:
But are you prepared, if they do, to bear the consequences?
TREASURER:
I do not run Holden, I do not run Toyota. Frankly, these are decisions that are made by the corporations. In the case of Holden, it is in Detroit. In the case of any other car company in Australia it is where home base is, which is not in Australia. We cannot control the boardroom decisions.
PRESENTER:
No, but you can make a contribution, and they are asking you to.
TREASURER:
We are making a big contribution. At the moment the Australian taxpayer is already subsidising the car makers in Australia.
PRESENTER:
As they do all around the world - taxpayers in every country that has a car industry. Are you prepared for it to shut down on your watch?
TREASURER:
I am not giving in to that speculative game. I want Australia to continue with a vibrant, viable manufacturing industry, including in motor vehicles. But I will say to you – there is no blank cheque from Australian taxpayers for a particular business.
PRESENTER:
No one's asking for a blank cheque.
TREASURER:
We will see.
PRESENTER:
It is more about politics then economics though, isn't it? By the sounds of things, you've got the South Australian and Victorian state elections in basically the next 12 months. You want the Liberal Party to have the best possible prospects in both of those elections, so that comes into it to, doesn't it?
TREASURER:
Hang on, one minute ago you were saying that I did not want to help Holden. Now you are saying for political reasons that I do want to help Holden.
PRESENTER:
Well I'm asking you a question.
TREASURER:
Which one is it? My view is that we want the Australian motor vehicle industry to continue, of course we do. We want people in jobs. We also want it to be the case that we want business to be sustainable so there is job security and job certainty. Ultimately business needs to make a profit. That is the determination of individual businesses. Government should not be trying to determine whether business makes a profit or not, an individual business. One business subsidy from the taxpayer is someone else's increased taxes.
PRESENTER:
My time with you is limited, I desperately need to ask you about bank profits, but before then, where's Tony Abbott? What is he actually doing as Prime Minister? This week the only announcement I've seen him make was to do with two adventurers going to the South Pole.
TREASURER:
That is a good thing, isn't it? They were raising some money, I saw, for charity which is terrific.
PRESENTER:
What, a good thing that the Prime Minister doesn't seem to be hands-on?
TREASURER:
He is hands-on, I can tell you.
PRESENTER:
Well, what's he doing, that's my question?
TREASURER:
He is ringing up his Treasurer every day, about different things. We spent all day Monday in meetings of Cabinet and ancillary Cabinet meetings. He has been flat out. I know because I have been spending a lot of my time with him going through the books and going through everything we need to do to try and run the country. Given the last few years – I do not think the success or failure should be based on the number of media appearances they make.
PRESENTER:
In Opposition, Tony Abbott was everywhere. In fact it was a daily road show, it was highly theatrical.
TREASURER:
I do not think it was theatrical.
PRESENTER:
In Government, he's been the vanishing Prime Minister?
TREASURER:
I do not think it was theatrical. I think it was real. Opposition leaders do not run anything.
PRESENTER:
No, he was either in Lycra or a funny hat or a hard hat or on a factory tour every single day.
TREASURER:
I do not recall him wearing a funny hat. I would just say to you, as Prime Minister you have got to run the country, with your Cabinet, and that is what we are all doing. We have got our heads down and we are going through all the challenges. Yesterday, I announced ninety-six changes in the taxation system.. Tony Abbott and the Cabinet were all part of that decision. It did not come out of thin air. That was a massive amount of work yesterday. We are continuing to do the work we need to do. Parliament goes back next week. We have got a vast amount of legislation to introduce. I think you will see more announcements from the PM in due course.
PRESENTER:
The Bankers Association are joining us next, but Joe Hockey, does it concern you that there is now $27 billion, in combined profits, for the big banks this year? And two Australian banks in the top ten in the world. It is a structural distortion of the Australian economy isn't it?
TREASURER:
It is a bit distorting, that data, because the Australian dollar is very high and other currencies are very low. Therefore, Australian companies look to be much larger in practice then what they are really are in comparison with some around the world. The second thing is, we have seen the demise of a vast number of banks around the world. The Royal Bank of Scotland was at one stage nearly the biggest bank in the world. Now it is on life support in the care of the British Government. You look at other banks like Citigroup or Deutsche Bank or the fact that Lehman's went down. It just goes on and on. The fact is the rest of the world is in poor shape when it comes to banking. Apart from the behemoths that are emerging in China that are not your traditional banks.
PRESENTER:
Well they are state backed.
TREASURER:
That is right. They are absolute behemoths.
PRESENTER:
Well it is a communist country let's not forget, with a capitalist economy.
TREASURER:
I have not forgotten that. The fact is that Australian banks are among the best in the world. The Canadians are actually more profitable when it comes to return on equity. They are the ones that are actually quite similar to us.
PRESENTER:
Back to my question though, it's of no concern to you whatsoever?
TREASURER:
We are having a Financial System Inquiry, which follows on from Stan Wallis's report in 1996. It is done every 15 years. You have a sort of grease and oil check on the health of the financial system. Competition in banking is one of the things that will be dealt with.
PRESENTER:
Well, opening it up to competition would be one way for consumers to perhaps get a better deal, but let's pursue that with my next guest. I'm indebted to you, I've taken up a lot of your time this morning.
TREASURER:
Thank you, Jon.
PRESENTER:
Joe Hockey, Federal Treasurer, speaking to us from his offices in Sydney.