PETER SWITZER:
Joe, thanks for joining us.
TREASURER:
Great to be with you Peter.
PETER SWITZER:
I’m sure it is. Considering the results, the reaction you’ve had to your Budget. Last year the Budget focus was on debt and deficit, this year it was jobs and growth. Are you worried about the economy?
TREASURER:
No. I think there is some good momentum in the economy, particularly I’m encouraged by good signs from overseas. The US is near full employment, you’re going to start to see some wage growth in the US. Europe certainly has avoided recession and is coping quite well with what’s happening in Greece. Japan on the back of lower oil prices is starting to get some real momentum in its economy. And China is certainly not going to come off as badly as some suggest. So I can see some good signs, and India which is a small fraction of our exports represents huge opportunity for our resources.
PETER SWITZER:
But, we seem to be growing in the low twos, when you’d rather be at least low threes. So, has this Budget been meant to push us into the threes over the next year or two?
TREASURER:
Oh, sure it will help in that regard, there’s no doubt about that. That constrained our ability to have further, deeper spending cuts. It was important that we get the balance right between the Budget bottom line and also the work of the Reserve Bank and I said repeatedly, you’ve got to have the Reserve Bank and the Budget working in the same direction.
PETER SWITZER:
Last year, before the Budget, I had John Hewson on my show and John said Joe was the best on field. It seemed to me you were. Then after the Budget you started copping a lot of flak because the Budget wasn’t being passed. If you had your time again, would you have played the Budget differently?
TREASURER:
Well, we did try and do too much in the first Budget. That’s because we could see the looming challenges. There’s now still much work to be done and we’re certainly not giving up on it. But, it is structural change that we’re initiating. For example, we can’t deliver those bonus payments in hospitals and schools that Labor promised but never paid for, and yet we’re still increasing spending on health and education by six per cent in real terms over the next four years. We couldn’t have the bonus payments in foreign aid, we couldn’t have the bonus payments in a range of different areas, so we’ve got to make sure the structural saves are there, and we’re continuing with the structural saves, but at the same time putting in place different mechanisms that are going to lift the economy. Such as, the tax cut for small business.
PETER SWITZER:
Well you know and I know that both business and consumer confidence tailed off after the Budget. Have you learnt from that experience that you have to work with the crossbenchers? Because in a sense if you have a Budget impasse again, it’s not going to be good for consumer and business confidence is it?
TREASURER:
Well, I’m pleased that Bill Shorten and the Labor Party have said that they’re going to accept our small business measures, which means that they will pass through the Senate, which gives certainty and stability to small business, which is hugely important. So that’s a great sign. Having said that, I don’t think still, they understand that if you’re going to have new spending in areas like childcare you have to have savings to help pay for it. We’re spending an extra $3.5 billion on childcare. So, if you’re going to do that, you need to have the savings to help pay for it. Part of that are changes to paid parental leave, part of that is also pre-existing changes to the family tax benefit that we want to use to pay for that.
PETER SWITZER:
So, have you improved your communication with the crossbenchers? Given the fact that Labor could still be a fly in the ointment. Do you think you’ve got a better relationship with the crossbenchers?
TREASURER:
Well, I think they’re obviously much more experienced, because when we delivered the Budget last year they hadn’t even been sworn into the Senate. So, I think there’s a more positive attitude there from a number of them this year, and they’re a bit more experienced. I think the Greens are going to represent a more constructive opportunity for us, given that Christine Milne was very difficult to deal with and Senator Di Natale, the new leader, is indicating he wants to move a little bit to the middle. That’s encouraging. Sooner or later, Bill Shorten is going to be clumped with reality, that he can’t have $59 billion of new spending promises with not a single dollar of saving to go with it. That’s where he’s at at the moment.
PETER SWITZER:
Could the $20,000 immediate tax write-off result in a bigger than expected reaction which could actually hurt the Budget deficit going forward?
TREASURER:
Well if there’s a bigger reaction, terrific. Because it means that those small businesses are investing and they’re buying the productive equipment that helps to grow their business. Hopefully they’ll be able to employ more people and they’ll pay more tax, so it’s really virtuous, it’s a virtuous cycle. So, from my perspective I say terrific – they’re not going to waste the money as you know. Small business people are very precious about their dollars, every dollar they’ve got is precious. When they invest in new equipment that’s about building their business and hopefully, taking them to a more profitable destiny.
PETER SWITZER:
Are you absolutely certain that Bill Shorten will support the small business package?
TREASURER:
Well that’s what he said. He has – he said that in his Budget in reply speech. But also, that was confirmed by the Shadow Treasurer, Chris Bowen. So, we’ll be introducing that legislation into the next sitting of the Parliament.
PETER SWITZER:
What about his offer to be more negotiating with you and the Prime Minister? Was that a surprise offering?
TREASURER:
No, great! Given that I’ve been around to their offices on numerous occasions asking them to negotiate and they didn’t want to, I welcome anything. Look, Australians want us to get on with good government and if the Opposition wants to cooperate that’s widely welcomed including by the Coalition.
PETER SWITZER:
So, it seems to me your childcare proposals hinge on Labor accepting proposals from last year. So, can you explain to my viewers, I want them to get this. It just seems like the childcare package seems good, but there was a bit of a proviso in there, so what is this proviso?
TREASURER:
Well, the bottom line is we made changes to family tax benefit last year. It’s important that those pass through so we can identify the savings that help to pay for the new childcare package. We spend about $20 billion on family tax benefit every year, we spend about $7 billion on childcare. So, what we’re doing is spending a bit more on childcare, because that’s what parents want. The Productivity Commission identified that there is 165,000 parents out there that want to work more, or at least go to work. So, what we said is okay, we heard you on the paid parental leave scheme that we had, you didn’t like that. That’s fine. We hear you, that you want to do a full six years, the first six years rather than the first six months, let’s deal with that and that’s how we’re going to pay for it.
PETER SWITZER:
So, but, if they don’t buy it. They seem pretty rigid on this, could this be another impasse situation that could affect consumer confidence Joe?
TREASURER:
No, I don’t think so, because we’re continuing to spend more on childcare each year. It’s just that we’d have a better system if the Labor Party came on board. Unfortunately Peter, I don’t want to be political but the fact is they want all the spending but they don’t want any of the savings. Bill Shorten’s so far pledged $59 billion of new expenditure but he’s even walked away from the savings that he had before the last election. So, something’s got to give with the Labor Party. They’ll never be credible as an Opposition and they’ll never be an alternative government until they can actually act responsibly and they’re not there yet.
PETER SWITZER:
You said earlier, you put the Budget in the context of a recovering USA, a China that won’t slow down as fast as people expect, Europe I guess reacting well to QE. But the dollar is a real fly in the ointment in many ways isn’t it, it’s frustrating the Reserve Bank, and therefore it’s not helping your cause. Are we dependent on the Fed? Is the dollar going to drop when the Fed starts to rise? Is that your view? I [inaudible] saying you’re an expert, but is that your hope?
TREASURER:
Well, look, obviously we’ve been heavily influenced by what’s happening in the United States. They’ve finished their quantitative easing, now there’s speculation in the markets about when the US Fed is going to start increasing interest rates. Every different set of data that moves in an opposite direction to the herd seems to influence the Aussie dollar as against the US. So, I’ll leave that to the markets and obviously, when you’ve got QE still in Japan and in Europe, there are going to be lots of different movements in currencies. But, from our perspective, the Aussie has come down from the 90 odd cents it was at when I delivered my first Budget. It’s come down quite dramatically, we’re factoring in around 77 cents now. It’s a little bit higher at the moment but then again, so is iron ore. It’s higher than the $48 that I forecast so, look, these things move around.
PETER SWITZER:
Okay. Is your job safe?
TREASURER:
Well, it’s up to the Australian people.
PETER SWITZER:
No, I’m saying internally, because Australian people don’t get the chance to…
TREASURER:
Well my job is as safe as anyone else’s job. We’re ultimately in the hands of the Australian people. But, having said that, I have never ever, never ever put anything other than the national interest ahead of myself.
PETER SWITZER:
Have you made any phone calls to BHP?
TREASURER:
I don’t discuss these things sorry.
PETER SWITZER:
But it’s an important issue isn’t it, the price of iron ore…
TREASURER:
The price of iron ore is very important and I do speak to obviously, all the key players. Both on the sell side and buy side.
PETER SWITZER:
But there’s no phone calls from the Treasurer saying gee it’d be good if the iron ore price was higher?
TREASURER:
Well, I don’t say anything privately that I don’t say publicly.
PETER SWITZER:
Alright. A Galaxy poll says that you trail Labor 48-52, but it was 43-57…
TREASURER:
Come on Peter, don’t get taken over by polls…
PETER SWITZER:
Well I’m just trying to see – obviously the Budget has been a big boost to you…
TREASURER:
But it’s got to be good for Australians, that’s what we’re focused on, having the right Budget for Australians. You know, if you just respond to the polls, you’re going to end up with bad policy, which is what happened the last six years under Labor. You know, in the end all they did was respond from poll to poll. We’re not going to do that, we’re going to lay down policy that makes Australia stronger. That’s what we want to do and frankly, I haven’t hung around 19 years in politics to be governed by polls. I actually have hung around to deliver good policy, as has Tony Abbott, as have all my colleagues. We’re all focused on better policy.
PETER SWITZER:
I read something brilliant. Probably about this time last year – and it was actually written by me [laughter]. I made the point…
TREASURER:
I must have read that.
PETER SWITZER:
Yeah you would have read it. The point I made was, I thought the economy was softening at a faster rate than for example, Treasury. You were playing hardball then and there was a lot of hardball for good reasons, and confidence went down.
TREASURER:
We’re still growing at 2.5 per cent though. It’s one of the fastest growing developed economies in the world today, which is pretty remarkable.
PETER SWITZER:
But since you and the Prime Minister have started talking jobs and growth, things have been starting to improve. Business confidence has started to go up, the Budget reaction is very good. Is this the kind of argument you are going to stick with until we are actually growing stronger?
TREASURER:
You have to earn growth, that’s the fundamental point. You have to earn growth. So, the Budget is one part of the story, but obviously economic reform is another part of the story. So, we stopped writing out cheques to businesses, that was a significant economic reform. We’ve opened up new trade agreements with Korea, Japan and China, that is a significant economic reform. In our last Budget we’ve started the process in relation to higher education reform. We’re underway in relation to reform of the Federation. We’ve got the tax reform paper. There are many moving parts, but we are continuing with the process of reform, that builds your stronger economy.
PETER SWITZER:
I thought I read you spent $50 billion and you’re spending another $5 billion, so in total $55 billion. But I keep hearing Labor say, you’re not spending on infrastructure, what is the story there?
TREASURER:
Well we are. Of course we are. As I said in last year’s speech, we’re getting on with building that infrastructure and you can see it out the window here. There are - it’s amazing, there are 65 registered cranes between the Sydney Harbour Bridge and Darling Harbour. So you can see things happening, even though that’s state [inaudible]. You can see things happening, so the asset recycling program that I put on the table with Mike Baird is at work. You can see that we’re getting on with projects all around the country, from WestConnex to NorthConnex, through to Gateway Motorway North, to North South Road, to [inaudible]. All over the country we’re actually getting on with it and the cranes are coming. They’re either in place or they’re coming now.
PETER SWITZER:
Joe, thanks for joining us on Switzer.
TREASURER:
Thanks Peter, thank you very much.