ALAN JONES:
I’ll just like to say it’s a delight to have an eminent politician such as Mr Hockey with us, however, it would be foolish to suggest you didn’t have problems. The Commission of Audit that Tony Shepherd brought down said that if you want to get to one per cent of GDP, a surplus to one per cent to GDP, you’re going to have to cut back $65 billion of expenditure in the next ten years. Now every international barometer says that economic growth for us and the world is down. For us, the mining boom is fading, you’ve got to find growth somewhere. I just want to ask you one simple question, why therefore, when that’s the situation, would you be destroying, and you are along with state governments, some of the best agricultural land in the world by approving massive mines on the Liverpool Plains on the Darling Downs, when that agricultural land has the capacity to provide the economic growth that the country desperately needs?
TREASURER:
Well Alan, it’s not either or. You can have great agricultural land and at the same time have environmentally sensitive mining proposals. In the case of the NSW Shenhua Mine that’s essentially a matter for the state government…
ALAN JONES:
No it’s not… you have to sign off on it.
TREASURER:
Well, there are very strict controls….
ALAN JONES:
8,000 acre hole in the ground of the Liverpool Plains, 8,000 acre hole Joe, bigger than London.
TREASURER:
On a ridge…
ALAN JONES:
It’s not on a ridge, whose telling you that nonsense? [Inaudible] I’m simply saying that you’ve got to cut expenditure or increase taxes because $65 billion of expenditure’s got to be cut to get into surplus. The mining boom’s gone; you’re knocking off agriculture, where’s this going to come from?
TREASURER:
Well the starting point is, since last year’s Budget we’ve actually cut $50 billion out of government expenditure. So we’ve made significant steps. But there’s more to do Alan, there’s plenty more to do. Our economic plan is focused on trying to lower the taxation burden, as we illustrated today by getting rid of that banking tax that Labor wanted to introduce. Lowering the taxation burden, but at the same time reducing overall government expenditure…
ALAN JONES:
What are you going to do? What are you going to do? I mean, the high income tax rate is 49 cents in the dollar. I mean, we’ve got a tax on those people on over $180,000 which is called a debt levy. We stuck half a per cent, Julia Gillard did, onto the Medicare levy, in order to pay for the National Disability Insurance Scheme, which won’t pay for the National Disability Insurance Scheme or is anything like it.
TREASURER:
Sure.
ALAN JONES:
And yet you’ve got figures which tell you that we’ve the revenue as a percentage of GDP is higher than it ever was, under Costello or Labor, higher than ever revenue, but we can’t pay our way.
TREASURER:
No, no, that’s not right.
ALAN JONES:
We can’t pay our way…
TREASURER:
It’s not higher than it was under the Howard-Costello Government. Revenue as a percentage of GDP was higher under the previous Coalition Government than it is today. Labor because of the GFC lost revenue, but from our perspective, we want to reduce the overall taxation burden and we have reduced it by $7 billion when compared to what the situation would have been if Labor were re-elected. Now, we got rid of the Carbon Tax as you know, the Mining Tax, we stopped them applying a new tax to vehicles, including FBT. Today we got rid of the banking tax. Importantly, we are trying to reduce the overall taxation burden which stimulates growth, because if people earn more money, then it means ultimately the government will get more revenue.
GRAHAM RICHARDSON:
Joe, can I just ask you, you talk about growth. At that summit last week, I’ve got a little quote here, I won’t waste thirty seconds [inaudible], I’ve got another one from Glenn Stevens. You produced a Budget less than four months ago, within two months of that time Glenn Stevens came out and said the growth figures weren’t right.
TREASURER:
No, he didn’t. I’m sorry, no he didn’t.
GRAHAM RICHARDSON:
He did again last week.
TREASURER:
No, Richo, Richo. I’m siding with Alan Jones here, run the piece [inaudible]…
‘It appears to be slowing, and slowing quite markedly, if our potential growth rate was 3 per cent and for arguments sake it’s fallen now to 2.5 per cent, that’s the equivalent of a loss of GDP over the decade of over 5 percentage points. Or in other words, if this is not because our population growth has slowed, it’s akin to us willingly accepting the impact of a recession.’
GRAHAM RICHARDSON:
That’s pretty devastating. The question is of course, are you still claiming that we’ll have 3.5 per cent growth in the next few years.
TREASURER:
Yes.
GRAHAM RICHARDSON:
You’re kidding. You’re the only person I know who thinks that, even the man sitting opposite here…
ALAN JONES:
We’re not going to go to Joe if we destroy agriculture, which is not what we’re doing. The Darling Downs and the Liverpool Plains, we’re not going to get it, it’s as simple as that. You people have gone berserk over mining, it’s a mining invasion. Now what are we going to get out of it. What are we going to get out of it? The Shenhua’s owned by the Chinese government for god’s sake. They’re not going to make any money out of it Joe, have a look at the international price of coal, so we’ll get no royalties. So in return, we destroy the Liverpool Plains. The Darling Downs, New Hope pay not royalties on the Darling Downs. Your man Hunt’s got to sign off on this, it is the best agricultural land in the world, you could eat the soil, what are we doing? It seems to me, we don’t read anything, we don’t read the assessments of these things, we swallow the mob knocking on our doors from the mining industry and that capacity to grow the economy is destroyed.
GRAHAM RICHARDSON:
I’m getting really worried about this whole growth thing. There was a consensus last week whether Joe wants to exceed to it or not, that the growth numbers are too optimistic there in the Budget. It strikes me as being pretty worrying….
ALAN JONES:
Well, where are you going to get the growth from Joe?
GRAHAM RICHARDSON:
Every business, when I talk to the BCA and all the rest, they all say the same thing, growth numbers are there and this is what they’re worried about, this is the question. What’s the plan for growth, because no one knows what the plan is?
TREASURER:
Well, hang on. Can I respond to the vast number of issues. Number one is we absolutely stand by our growth figures, at the time I delivered the last Budget, major economists came out and said yes they’re reasonable. And the Labor Party’s preferred economist Stephen Koukoulas said I was being too conservative. So last year we said we’d have 2.5 per cent growth for the last financial year. We’re about on track with that. And we’ll find out tomorrow when the National Accounts come out.
GRAHAM RICHARDSON:
Oh, this coming year?
TREASURER:
Yeah, sure, this coming year, we’re expecting it to increase to 2.75 and then to go to 3.25 and start to increase again. That’s step one. Step two, our plan to deliver it, $50 billion in infrastructure contributing to $125 billion. There are 73 registered cranes in the Sydney CBD at the moment, which is an example of that movement, just an example. Other parts of Australia aren’t doing so well. One of the areas that is not doing so well, is the huge area between Townsville and Brisbane, which has seen 15,000 mining construction jobs go. I have had to fill that gap, in part with lifting of the property market and construction, dwelling approvals now are at record highs, all good, but there’s more to be done. We do need mining Alan…
ALAN JONES:
I’m not suggesting that we don’t need mining, but get it off prime agricultural land.
TREASURER:
If it is affecting prime agricultural land then…
ALAN JONES:
Oh, come on. Have you known when a mine interferes with agricultural land [inaudible] go to the Hunter Valley, take a helicopter over the Hunter Valley and it looks like a crater of the moon. Look, can I just say Graham, there’s a whole heap of people watching here and saying, how does this relate to me. We’ve got the highest personal income tax rates, almost the highest, in the world. If you think, if anyone thinks, that some poor bugger on $80,000 is a millionaire, once he gets to $85,000 on the scales, he’s paying 37 cents in every dollar tax. Now, you’re talking productivity…
TREASURER:
Plus the Medicare levy.
ALAN JONES:
Yeah, plus the Medicare levy, 39 cents. How does that bloke get excited in the morning about going to his - this is fantastic because 39 cents in the dollar means, I work all January, all February, all March and all April, for the taxpayer.
TREASURER:
Absolutely, right.
ALAN JONES:
Well how are you going to reduce that?
TREASURER:
And that is exactly what I said in the speech last week, that we have to reduce the overall tax rates and thresholds in order to provide people with the incentive to go out and work. Now the challenge is, the second highest tax threshold which you identified, which is 37 cents plus the Medicare and Disability levy, at $80,000. Currently average annual earnings are $77,100. So within a year people are on average wages are going to go into the second highest tax threshold which is a disincentive…
ALAN JONES:
Another 330,000…
TREASURER:
So what we’ve got to do is find a way by looking at the overarching tax mix, but also importantly, continuing to decrease government expenditure, to be able to give people back more of the money that they earn. In turn, that will create more jobs…
GRAHAM RICHARDSON:
I’ve got to say, you said continuing - spending. In 2015 according to your numbers, your numbers, will be the second highest percentage of GDP in history and the only year higher was 2009, where…
TREASURER:
You were part of a government that actually had high spending at various points…
GRAHAM RICHARDSON:
Well this goes back to 1970, I don’t think I was around in 1970, I didn’t get elected that young, but this is extraordinarily high. And I was just going to say, net debt, you keep referring to this wonderful job you’re doing on debt. $285.8 billion this year. Highest dollar figure it has ever been. So where is all this reform coming, I can’t see it. Spending’s up. Debt’s up.
TREASURER:
Okay. So, what we inherited was a spending program that I’m sure both of you agree was unsustainable. You’re absolutely right. We had to make some very difficult decisions. We couldn’t continue with the Gonski funding proposals to the states, which was based on money that didn’t exist. We couldn’t continue with the elevated hospital bonus funding that Labor put in place, which was never funded. The NDIS is still unfunded. We’ve had a massive backlog of defence spending, which we’ve had to address, and we’ve had national security issues. Plus, we’ve put more into infrastructure. We’ve had to balance all of that. We are reducing government expenditure from 25.9 per cent of GDP, which it is at the moment. We’re reducing it. We’re reducing the deficit by about half a per cent of GDP every year going forward. And we’re being measured in the way we’re doing it…
GRAHAM RICHARDSON:
Only if we believe in the growth figures, which even you have said Alan are rubbery.
TREASURER:
No, the growth figures aren’t rubbery. I’ll give you a good example. Unemployment, which I think is the most important indicator, unemployment’s still too high today, but there’s not a single economist that thinks that unemployment is going to get significantly worse which would indicate, that there is no economist that thinks the economy is going to deteriorate. Now what we saw last month…
GRAHAM RICHARDSON:
What we’re saying is it won’t get 3.5 per cent growth….
TREASURER:
We saw 38,000 new jobs created last month. Bill Shorten and the Rudd-Gillard Government created 3,600 a month. So we had more than ten times the number of jobs created last month in Australia compared to what we inherited.
GRAHAM RICHARDSON:
And what was the unemployment rate when they left office and what is it now?
TREASURER:
Well the participation rate is higher which indicates that more people are coming into the workforce…
GRAHAM RICHARDSON:
Wanting to work, wanting to work.
TREASURER:
That’s right, it’s a good sign. In fact your mate Chris Bowen actually forecast 6.25 per cent in his last Budget statement.
ALAN JONES:
Can we just go back to struggle street, really, Joe. Because one of the problems if I might say respectfully, I just don’t think the government sell a story adequately. I believe it would take me less than ten minutes to persuade the people living out here why we could increase the GST to 15 per cent. We’ve got the third lowest GST in the world, what would that do? We’ve said on this program many times, GST is a tax that you can avoid, legitimately, legally. So you want to drive a Mercedes, Graham wants to drive a Holden, he pays less tax. Your wife wants to wear pearls, Graham’s wife hates jewellery, you pay more tax. You want to eat out every night, Graham eats at home, you pay more tax. That’s the expenditure tax. Now you get over $40 billion. If you then said to the people, listen, let’s put this up, we’ll get $40 billion, remove the exemptions, the welfare can look after that, and with that $40 billion we’ll cut company tax to 27 cents in the dollar, we’ll reduce these ridiculous scales where someone after $37,000 is on almost 40 cents in the dollar. So there’s the first story. We explain that to the people why that can or can’t be done. Then we come to the second issue, which is, another $40 billion we can save, and that is the chestnut of superannuation. Why is it, when some battler out there puts $10,000 into superannuation he gets a concession of 4 cents in the dollar. But I put $10,000 into superannuation and I get a concession of 30 cents in the dollar. Surely to God, Alan Jones doesn’t need a tax incentive to save for his retirement. This is big money. That’s $40 billion concessions in super, $40 billion we can get in GST, how do we sell the story?
GRAHAM RICHARDSON:
Hear, hear. Well done. I’m with you, go.
TREASURER:
Well, my work’s complete. Alan, there’s a number of things. Firstly on the GST, the Prime Minister and I have endeavoured to keep as many options on the table as possible in relation to tax reform in our discussions with the states. And I’m not getting into the ruling in or out. But in relation to the GST, we have been discussing that and other measures with the states and as you know, it needs the agreement of the states. Those discussions are continuing. We’ve received 850 submissions from the general public in relation to tax reforms, so we’re working our way through those. It is important to understand that we’ve got to get the right tax mix to provide incentive, which is exactly what you’ve just identified. In relation to superannuation, a lot of superannuants who have accrued quite a considerable sum in their superannuation did it under old laws. They did it under old laws. You cannot accrue massive amounts of money into your superannuation now as a result of changes made by the previous Labor government, and also, the government before that. From our perspective, superannuants are receiving such low returns at the moment.
ALAN JONES:
Not the issue…
TREASURER:
Well it is important Alan.
ALAN JONES:
It’s not the issue, my friend. Graham is on $65,000 a year, you’re on $650,000. When Graham sticks money into superannuation, they say, oh be grateful Graham it’s only going to be 15 cents in the dollar. But Graham’s on $65,000 a year, he’s only paying 19 cents in the dollar; he’s getting only a 4 per cent concession. You’re on $650,000 and we’re still allowing you to put the money into superannuation and you’ll only pay 15 cents in the dollar. Mate, that’s what the issue is. It’s loaded at the top end and we can’t afford to…
GRAHAM RICHARDSON:
Let’s face it mate. You get your accountant… and the one day he puts $30,000 in and he takes $30,000 out. One’s a distribution, one’s a contribution, and you’re washing tax out. The little bloke can’t do that. It’s just not fair.
TREASURER:
Well, we are reluctant to touch superannuation because at the moment superannuants are getting very low returns, if you impose a new tax….
ALAN JONES:
Well so are self-funded retirees.
TREASURER:
Well exactly the same. If you impose new taxes on those people now, it simply reduces their ability to spend. And if you talk about economic growth, which Graham was a little bit earlier, more than half of economic growth comes from household consumption. So we do not want to do anything to depress household consumption…
ALAN JONES:
In those tax rates, how can you have household consumption? You said self-funded retirees Joe…
GRAHAM RICHARDSON:
A lot more than the battler to spend, and I’m worried about the battler… you can’t just give me the money, or Alan the money or yourself the money, you’ve got to give it to the ones down the bottom end and you’re not. Look, can I ask another question, we’re running out of some time here. Alan said on this program here those growth numbers are rubbery; I think they’re dodgy, you’re not going to agree with that…
TREASURER:
No, I don’t agree with that.
GRAHAM RICHARDSON:
Well let’s say even if you’re right, the only way that your numbers come good in the end, when you get us back into surplus, is bracket creep, which you’re now saying you’re going to abolish. If you abolish bracket creep and whether it’s $5 billion a year or $6 billion, it doesn’t matter it’s a lot, you abolish that, how the hell are you going to pay the bills. Where do you make your numbers add up?
ALAN JONES:
Ninety per cent of your increased revenue is coming from bracket creep. Nine dollars in every ten is coming from bracket creep. So if you’re going to abolish bracket creep, you’ve got to find the dough somewhere.
TREASURER:
Well, for a start, in the last Budget I delivered a $5 billion tax cut for small business. And we found the money to help to pay for that through other savings.
GRAHAM RICHARDSON:
Well done, it’s worked.
TREASURER:
It has worked, it’s been incredibly successful. And it was the biggest tax cut that small business has ever had. And it’s the lowest tax rate now, 28.5 per cent company tax rate for small business is the lowest they’ve had in 40 years. We found the money for that. Only by diligently going through every single line item in the Budget can you find the savings that help in that regard.
GRAHAM RICHARDSON:
It’s a lot mate, its 5 or 6 a year.
TREASURER:
I announced in last year’s Budget and people weren’t paying attention, I said that we were building in future tax cuts into our underlying Budget assumptions. I said that in the Budget, I actually had it in the Budget papers and I’ve said it repeatedly, we have built it into our underlying Budget assumptions. And we inherited $667 billion of what would be government debt; we’ve reduced that by $110 billion. More to do [inaudible]. The best way to fix the Budget is to have more economic growth and have more people in jobs.
ALAN JONES:
But you’ve got no plan for the growth that’s the problem…
GRAHAM RICHARDSON:
You talked about the bulk of your growth is coming from consumer spending. That’s going out there and spending in the economy that grows product development and all the rest of it, terrific. Tony Abbott when he first became Prime Minister, we talked about the GST we’ll put that to one side, that could get you $40 billion. We talk about concessions to superannuation, which I’m not entitled to, that could get you another $40 billion, plenty lying around. Now Tony Abbott when he became Prime Minister said I’m not going to chase Holden down the road with an opened cheque book. And the nation clapped, well done. However, because you’re a prisoner of ideology, all of you lot, you’re chasing wind turbines down the road with an opened cheque book. And so we are paying $20 billion plus on a Renewable Energy Target when we know that solar and wind will never, ever, ever, meet our electricity needs. If these things are viable, why should they be subsidised by government?
TREASURER:
Well Alan, every time I talk to you about wind turbines, I get myself in trouble.
ALAN JONES:
You hate them. So do I, they’re not viable.
TREASURER:
Look, we do have a role to play in supporting and encouraging renewable energy, within reason. We’ve also got a reasonable role to play in ensuring that we reduce carbon emissions, I think that’s perfectly reasonable and appropriate. And Australia is doing more than its fair share than any other country in the world. Per capita we’re reducing the emissions by half, which is more than any other country in the world per capita. Anyway, let’s not…
ALAN JONES:
Carbon dioxide in the world is more than 0.04 per cent…
GRAHAM RICHARDSON:
I don’t want to have a climate change debate right now.
TREASURER:
Nor do I.
ALAN JONES:
I’m only asking you why the little small business that’s been watching you, rolling his sleeves up early in the morning, gets no subsidy from the government. But some foreign outfit, sticking up a wind turbine in Goulburn is subsidised. You tell me how that makes sense, because it doesn’t make sense to me.
TREASURER:
This is why you’ve got to go through every line item in the Budget. You inevitably going to inherit legacy commitments by previous governments, you’ve got other policy commitments, but I want to assure you that the best way to improve the Budget bottom line is to get more growth and more jobs. We are defying all the economists as a nation at the moment by seeing good job growth and more jobs being created, even though we’re not getting to the level of…
GRAHAM RICHARDSON:
Last question [inaudible]…
TREASURER:
Maybe I can ask the last question.
GRAHAM RICHARDSON:
You’re almost entitled to say do. I’m just wondering when are you going to say to us, that if you increase the GST to 15 per cent, by the way of which I support, Alan’s talked about how it’s going to be allocated to this and allocated to that, what about the states. Don’t the states get the money from an increase to the GST? Didn’t Mike Baird raised this because he wants to build hospitals and schools and he wants to build bridges and railways and roads. How would you then give them the money they want, and state budgets are in terrible disrepair, as you know…
TREASURER:
Well some of them are in better shape than ours.
GRAHAM RICHARDSON:
That is no recommendation…
TREASURER:
I’ll tell you why, because they’ve had the GST revenue over a number of years, and also, there’s also been some buck passing to the federal government for expenditure in some areas, for example, health and education. But the fundamental point is, look, Richo, you’re right. Hopefully we can get common sense agreement between the states and the commonwealth on ensuring that we improve the taxation system for the new age, that’s hugely important, and deliver the revenue they need. Today we saw Daniel Andrews come out in support of the China Free Trade Agreement. A Labor Premier came out and support it when Bill Shorten is opposing it. That is a good sign of bipartisanship, he knows what’s right. I’m hoping he’ll see the same common sense in relation to tax reform.
GRAHAM RICHARDSON:
Can I just ask - he doesn’t seem to be too good on the GST.
TREASURER:
Jay Weatherill is to his credit. He is being realistic about it. And Victoria and Queensland are proposing to increase the Medicare levy, which is about increasing income tax, that’s a short term solution.
ALAN JONES:
Joe, Joe, before we go, just one thing. You’re going to go to an election, any government goes to an election, the biggest issue is simply, you’ve heard it from every President and every Prime Minister, is hip pocket. What’s in my pocket, it’s called cost of living. Now, the average credit card rate is 17.5 per cent ahead of the cash rate, no one cares, just let the banks go and please themselves. Then you drive up the Pacific Highway, you know what the petrol price is, you know the value of the dollar, and you drive up the Pacific Highway and the oil companies are ripping off motorists every morning and not one person in any government, federal or state, open their mouth. Bruce Billson tries, and I say Bruce, they’re laughing at you. They’re laughing at you. You’ve got to be able to say to people, you’re on their side… Don’t wind me up; I’m talking the cost of living. You’ve got to be able to say to people, I know what the cost of living means to you, and the cost of living is too high… and you’ve got to answer it after the break.
[COMMERCIAL BREAK]
ALAN JONES:
He’s talked all the way through the break without drawing breath. I hate saying it, I feel a bit sorry for Hockey right now.
TREASURER:
I think there was one breathe, maybe just one. There was a pause.
ALAN JONES:
Cost of living, cost of living.
TREASURER:
Look, cost of living is the issue. And that’s why we got rid of the Carbon Tax, it was hitting people’s hip pocket…
GRAHAM RICHARDSON:
You can’t keep talking about that. What are you doing about credit cards and petrol prices?
TREASURER:
On credit cards, what we have done, is I’ve already asked my regulators to investigate why there were such a large gap…
GRAHAM RICHARDSON:
I’ll answer that. They’ll say credit card debt...
TREASURER:
They won’t say that…
GRAHAM RICHARDSON:
The banks are giving credit cards out to every Tom, Dick and Harry…
TREASURER:
Well they do, but also, they’re also hybrid products. Some people have plain vanilla credit cards with low rates, others have frequent flyer points, others have interest free periods and so on. It needs a detailed analysis and that’s something I’m working through with the regulators at the moment. On petrol prices Alan, the biggest influence on petrol prices, is a combination between what’s happening, and it went up a bit today because of OPEC’s statement, the supply of oil globally, but also where the Australian dollar is at as well, because the Australian dollar’s been coming down.
GRAHAM RICHARDSON:
The same petrol, 118 cents on Friday, 142 Saturday, come on! They’re laughing at us.
TREASURER:
It is an old age problem. It is $1.41 today, it flips around. But we don’t control prices.
GRAHAM RICHARDSON:
Did you see the story this week about this bloke Les [inaudible] who got a credit card. He was jailed in 2008, pleading to 91 charges of fraud…they gave him the credit card. They said he should never have gotten one. He got out of prison, he got off ice, he wanted to take a holiday to Hong Kong, he went and got a visa card. And now the banks say, we’ve got these bad debts. Why have we got bad debts, you wear the bad debts, you’ve created them by giving credit cards to people them that shouldn’t have them.
TREASURER:
And as the Reserve Bank said, they key things is for people to shop around. There about 90 different types of credit cards on the market at the moment.
GRAHAM RICHARDSON:
We got to wind up, but I am going to have the last question. It’s just too elastic, this 15 per cent GST, if we get it, there’s no way, we can fix up all of those things, sort out the state’s problems as well. The numbers don’t add up, so how are you going to do it?
ALAN JONES:
Cut expenditure. You have to cut expenditure. Tax reform is not about increasing expenses, it’s about cutting expenditure…
TREASURER:
I think Alan makes a legitimate point. You’ve got to reduce expenditure. It is unsustainable the amount of money we’re spending at the moment. That’s why we have to keep getting it down. And a lot of those areas are, areas that we inherited, which we’re trying to address. The second issue is in relation to taxation, we’ve got to get the balance right. There has to be personal income tax cuts to provide an incentive in the system for people to earn more and have a go.
GRAHAM RICHARDSON:
Well I wish you were reducing expenditure, but you’re not, and we haven’t got time to argue about that. That’s the last comment. And it’s good night from Richo and Jones.