PETER VAN ONSELEN:
Joe Hockey we appreciate you being there, I want to start by asking you I guess about this front page of The Australian, it’s also been reported. Doubters are clowns says Joe Hockey. I had to read into it I thought there was a bit of self-loathe in there because I recall in Opposition you know, the economy was a catastrophe, we had a debt problem, all these sort of hyperbole that followed. Admittedly the Prime Minister was worse than you, but it’s actually critics of you now that you’re in power that you’re referring to.
TREASURER:
Well Peter, there have been a number of people that have been predicting recessionary behaviour over the last few days and I thought I’d call them out, and on the back of the National Accounts which are the authoritative information – source of information in relation to the economy. The National Accounts came out yesterday for the March quarter, which showed that Australia has one of the fastest growing economies in the developed world. So, quite frankly the numbers speak for themselves.
PETER VAN ONSELEN:
Economists are now saying though that when you look into those numbers, yes it’s 0.9, they thought it would be 0.7, but the driving up of exports for example. Their argument is that the detail behind the data doesn’t necessarily paint as rosier picture as the outward figure might suggest.
TREASURER:
Well there’s always more work to be done, but if we’re exporting more how good is that, that’s terrific. We’re exporting more, hopefully we’re getting more income for the nation as a result of exports generally, but the economy is growing. We are on track to have a 2 ½ per cent growth rate for the current financial year, increasing over the next few years. That’s very encouraging. I still think that there are very positive signs offshore with the United States economy, despite a weak first quarter, a weak March quarter, I think the US is going to strengthen. Japan is strengthening, Europe is strengthening and China still has a strong economy, so they are all good signs for Australia.
PETER VAN ONSELEN:
But do you accept though that the economy looks weaker now than it perhaps did 12 or 24 months ago, and debt is obviously rising as well, even if the forward estimates suggest it is coming under control…
TREASURER:
I didn’t say that.
PETER VAN ONSELEN:
But I’m saying do you accept that, do you accept that that’s the case?
TREASURER:
No, the Australian economy isn’t weaker now than it was 12 months ago, I don’t accept that at all. I simply focus on the fact, for example in the first three months of this year, we had more than 80,000 new jobs created, which is a massive increase in job creation compared to what occurred for example under Labor. We’ve got nearly four times the rate of job creation in Australia than occurred under the last 12 months of Labor.
PETER VAN ONSELEN:
Can I ask you some of the policy disagreements, I don’t mean between the Government and the Labor Party, I mean between the Government and the new Secretary of Treasury. He’s got a view about the housing bubble, but more importantly he’s got a view about superannuation which really doesn’t accord with what we’ve heard from the Government, particularly from the Prime Minister. Is that healthy, free and fearless advice? Or is it a sign perhaps that the Government needs to de-politicise its thought process and listen more to the Treasury Secretary?
TREASURER:
Peter, you’re making me feel a little bit cynical about that question, I’ll tell you why. Because, we are at one on this. Obviously the Government has its hands full with reviews. We’ve got a taxation review, we’ve got a review of the Federation, we’ve got a Productivity Commission Inquiry into Industrial Relations, we’ve got the Agriculture White Paper that we’re responding to, we’ve got the Northern Australia White Paper, we’ve got the David Murray Financial System Inquiry review that we’re responding to, we’ve got the Harper – Professor Harper review of competition policy, I think we’ve had enough reviews and we’ve got enough reviews underway.
PETER VAN ONSELEN:
But that’s my question in a sense Treasurer, are you going to bring all of that together and are we going to see a serious fightback-esque package for the next election? You know, something strong that brings all those reviews towards a policy script that you take the voters and you say, re-elect us and this is our second term agenda.
TREASURER:
Well, in the next few weeks we’ll be responding to a number of those reviews, the Agriculture White Paper and the Northern Australia White Paper. There’ll be a response in the next few weeks. David Murray’s Inquiry I’m expecting to respond to in the next couple of months. The same with Professor Harper’s Competition Inquiry. Having said that, the reform of the Federation and the reform of the overarching taxation system are very substantial reviews. We’re working with the states on both of those. In relation to taxation, which includes the superannuation aspect as you know, we have called for public responses, those responses are currently due. We’ll be making announcements toward the end of the year, including the release of a further major discussion paper which will lay out…
PETER VAN ONSELEN:
Is there wiggle room on superannuation Joe Hockey? Is there wiggle room on superannuation, because the Prime Minister has obviously ruled it out for this term. Does that mean that you can take something to the next election in that super space? Are you comfortable with that?
TREASURER:
Well, we are making it very clear and I think this is really important Peter, that people understand this. We do not want to have unforseen, dramatic changes to superannuation this term. Anything that’s going to hurt super, we do not want to get involved with at all this term. We’ve said that previously, we’re keeping to that. Why? Because the constant change in superannuation is very dislocating for a lot of people that rely on superannuation…
PETER VAN ONSELEN:
Okay, but you’re not ruling it out for a second term?
TREASURER:
Well, well, hang on, I mean we’ve got no plans for a second term as I said because we’ve got our hands full with a range of other different inquiries. I think we’ve got to nail down all the things that are before us today. It’s only the Labor Party that actually wants to introduce new taxes and have new changes on superannuation. The reason why it is so debilitating to have new taxes on superannuation is because as the Governor of the Reserve Bank pointed out quite recently, we are in a period of very low returns on assets, this is a global phenomena, very low interest rates. The last thing you would want to do to people relying on investment income, is to hit them with a new tax, which is what Labor is proposing. Hit them with a new tax when they’re getting already lower returns than they would have expected.
PETER VAN ONSELEN:
Okay, no plans but you don’t want to shut the door on it for a second term, that would be irresponsible.
TREASURER:
Well, I’m not going to get into the semantics of those sorts of timeframes. Our words and our deeds are clear. We are not imposing any new taxes on superannuation. We have no plans to undertake any changes to superannuation that would hurt the superannuation savings of Australians, and that is in stark contrast to the Labor Party.
PETER VAN ONSELEN:
Let me ask you about the various reviews that you mentioned. I think it’s telling that some of the ones that you name, not to suggest that they’re not important, but they are the low-hanging fruit by comparison to things like the White Paper on Tax, or the White Paper on Federation which you raised at the end. Then of course the Productivity Commission on IR, IR is a very difficult one politically, you’d know that as well as anyone as a former IR Minister. Are those three, the really tough stuff if you like, are we going to see serious responses to that in a policy sense for the next election? Or do you hope that we will be able to include that in a Coalition agenda for the next election?
TREASURER:
Well it may even come before the next election, the timing of the next election is a matter for the Prime Minister. But, quite frankly, we’re putting a lot of effort, a lot of effort, into our Taxation White Paper and the Federation White Paper. The Prime Minister has a summit scheduled with the Premiers and Chief Ministers in July. I have a further meeting with the State Treasurers in July and August. There is a lot of work to be done, and you know what? You can have a lot of significant structural change without creating a massive upheaval in the community. I think what Australians are crying out for is a period of stability and certainty. That’s what we’re endeavouring to give them. But at the same time, you can never give up on reform because reform has no finishing line, so we’ve got to make sure that we implement measured reform and we have a clear timetable and a clear path. But also, we’ve got to be able to show Australians what Australia is going to look like as a result of the change in taxation, and as a result of the changes in the Federation.
PETER VAN ONSELEN:
You mention the tax summit coming up. Of course in 1985 another Treasurer suggested a GST tax summit, I’m talking about Paul Keating. He was rolled by his Prime Minister who was worried about the politics of it. Often Prime Ministers have their political mortality in sight more than the Treasurer does, we’ve seen that throughout history. Are you worried about the same thing happening to you?
TREASURER:
No, I’m not worried about my mortality. I’m focused on what is right for Australia and I have no doubt the Prime Minister is exactly the same. We’re not having a tax summit just to correct you. I’m having a meeting with the Treasurers. We’re having a number of community meetings about taxation around the country, I’ve attended a number of those community forums about taxation policy. We’re going to continue consulting broadly with the community. But there’s no tax summit, just to clarify that. I don’t want it to go – I know you wouldn’t do this Peter, but I don’t want it to go [inaudible] here and suggest there is going to be a tax summit.
PETER VAN ONSELEN:
Alright, fair enough. I want to also ask you if I can I suppose, about bracket creep. All sides of politics say that it’s a concern, the economists say it more loudly. But of course the financial pressures of getting back to surplus and then starting to pay down debt always seem to take precedence. When can we actually see some action on bracket creep? Because I’ve said it before and others do as well, that’s where the real heavy lifting is being done towards paying down debt. It’s an unproductive way to do it.
TREASURER:
Well, it is hugely important. I’ve said this on a number of occasions, that we don’t allow Australians on average income to drift into higher tax brackets, because then to explain what bracket creep is – because of inflationary pressures on wages. There’s not a lot there at the moment by the way. There’s not a lot there in relation to wages but gradually wages will over time go into higher tax brackets, cause people to go into higher tax brackets. That does have a negative impact on the economy and that’s the crucial point, it starts to hurt the economy when people move into higher tax brackets. So, what we’ve got to do is we’ve got to constrain government expenditure and constrain the growth in government expenditure so we can get the Budget back to the point where we are living within our means and then we can start giving substantial tax cuts to the individuals that are working so hard to help to pay for the government expenditure. Now, it is a timing issue. We have already said that we do not want to see taxation revenue continue to grow and grow and grow, to the point where it becomes a substantial disincentive for everyday Australians to go to work, and work longer or work harder or earn more money. So we’re the ones, we’re the only ones that have put on the table an economic plan, a budgetary plan to address the issue of bracket creep.
PETER VAN ONSELEN:
Alright, Treasurer Joe Hockey I know you’ve got to get ready for question time, no doubt you’ll be in the thick of it, we appreciate your time on the program, thanks very much.
TREASURER:
Any time Peter, thank you very much.