BOCKING:
Treasurer, good morning.
TREASURER:
Good morning Stuart.
BOCKING:
Nice to be able to chat with you again.
TREASURER:
Good to be back.
BOCKING:
Thank you very much [inaudible]. Is it ten o’ clock in the morning or ten o’clock at night? Ten o’clock in the morning, fair enough. The issue of tax reform, it’s proving difficult as we always knew it was. The Opposition are well and truly against the idea of an increase in the GST, a broadening of the base of the GST, some of the States are a bit lukewarm as well. How do we achieve reform given you’re going to push this, but you want a degree of consensus before it can happen?
TREASURER:
Well, I think there needs to be strong community support for tax reform and I think the broader Australian community does appreciate that unless we undertake change, unless we undertake reform that strengthens the taxation system and ensures we have a tax system that is ready for a 21st century economy, then it will have a negative impact on our future prosperity as a nation. Now, when the tax system was designed it was the 1950s, there’s been changes along the way, but if you need any evidence that reform never ends then just have a look at Greece and that will illustrate the fact that unless you continue to make changes, positive changes to your economy, and even in their case, to the taxation system, then you’re going to pay a very heavy price and the people that will pay the greatest price are those that have the least capacity to pay the bills.
BOCKING:
But do you accept at some point that you might have to actually lead the way, bring the people with you, enunciate the case rather than just hoping that business groups, community groups, or even Labor and the Greens get behind you on a reform? Because, it seems to me, one of the few areas where there is a consensus is on the issue around the tax treatment of concessions on superannuation, and yet that’s one area that you’ve ruled out. So the one area where there is a degree of consensus, you said no.
TREASURER:
Well, there’s a few issues you’ve just raised there. Firstly, we are leading the way. We’ve already put out a major taxation discussion paper. More than 800 submissions have come back from the community. Secondly, we did abolish the Carbon Tax. We did abolish the Mining Tax. When we came to Government, there were 96 announced taxation changes, dating back more than a decade, that hadn’t been legislated which created uncertainty. We’ve resolved those. And we’ve now collected less tax than would have been the case if Labor were re-elected. But there’s more work to be done. That’s the point we’re making. Now I don’t think there’s going to be any big bang tax reform, that might have occurred when the GST was introduced, or when there was previously a taxation summit under Hawke and Keating. I think this is going to be more gradual reform, but longer term reform. And why is that? Because the economy is changing dramatically. As I pointed out yesterday, it was inconceivable when the GST was introduced, to look at companies like Facebook and Airbnb and Uber and so on, who largely operate outside the existing taxation system.
BOCKING:
That’s right. In terms of the GST, I mean, when you were on Q&A the question was raised about feminine sanitary products. You said, well I’ll have a look at that. It seems to me your response should have been that if there’s any concern about equity, perhaps we need to broaden the base and extend it to some of the so called male products, if you like. We can’t afford to narrow the base can we?
TREASURER:
Well, no. But in the case of sanitary products for women, there’s quite a history there and it was part of the negotiations with the Democrats and at the time, the Democrats overlooked that…
BOCKING:
Led by a woman.
TREASURER:
Well, yeah, they were. But I don’t see how that’s quite relevant?
BOCKING:
They were women’s products but somehow that was overlooked. They were against it, is what I’m saying.
TREASURER:
Look, when someone raises it with me and it is a contentious issue, I’m happy to take it to the States because it’s their tax. It’s their tax. Now, yesterday Dan Andrews, the Premier of Victoria, said there’s no way we’re going to support any changes to the GST that increases the rate or broadens the base. Well, it’s game over. I mean, if the guy that’s going to collect the money, and get the benefit of the money, says there’s no way I’m going to do it, well then, we’re all wasting our time talking about the GST.
BOCKING:
So if it’s not the GST, it wasn’t so long we had Kevin Rudd with this proposed Federal takeover of hospitals. Now you’re saying, we think ultimately the States should be self-sufficient when it comes to hospitals, when it comes to schools. Where does the revenue stream come from then for them if it’s not from the GST? I spoke to the Grattan Institute yesterday about this broadly based property tax, could that be an option?
TREASURER:
Well, the States actually need to take the lead on this. They are elected Governments. They are elected Governments, Stuart. They want us to run the whole argument about tax reform, and they just get a cheque from the Commonwealth Government. Well that’s not going to be the case. This needs to be a collaborative process between State Governments who are effectively challenged with their revenue streams, they rely on the Federal Government for revenue. What we’re saying is if you don’t have to work hard for the money, then you’ll never be careful about the way you spend it. And from our perspective, nearly 23 per cent of their revenue comes from the GST. We went through the process, all the hard politics of raising the GST, undertaking that reform, gave all the money to the States. Now if the States want additional revenue, they actually have to be party to the conversation. And I don’t think that’s unreasonable at all.
BOCKING:
Well, it is their tax, it is their money. Based on this, I don’t see how we can ever get the approval of every single State and Territory leader [inaudible] yes, to either the broadening of the base or an increase in the rate.
TREASURER:
Well, you’re right. Therefore, we shouldn’t waste a whole lot of time and breath talking about the GST and look at other taxation reform. But also be mindful that the States over time are going to run out of money. Bear in mind a lot of States are running surpluses at the moment.
BOCKING:
Well that’s right, in New South Wales.
TREASURER:
Well, a lot of States are. One of the reasons why, is that they’re getting massive windfalls out of stamp duty and land tax. Now, good luck to them if that’s the case. But as you know, every boom doesn’t necessarily last forever. So sooner or later, there’s going to have to be State taxation reform. South Australia has said that’s the case. The ACT has undertaken fairly significant taxation reform. The other States need to think carefully about it.
BOCKING:
I noticed the Reserve Bank today warning the Government to consider the future of negative gearing, arguing it could encourage debt fuelled property speculation. Now again, this is an area where you’ve ruled out any changes. Is there an argument to say that if we’re worried about debt fuelled property speculation, maybe we put a limit on how many investment properties you can claim negative gearing against?
TREASURER:
Well, people are perfectly entitled to put that forward. But let me provide some real facts and bear in mind the Labor Party wants to end negative gearing, and that’s where they’re at. They’re saying, well, we think it’s being abused. What they’re not aware of or not thinking about and haven’t done their research on, is that around 900,000 Australians earning less than $80,000 a year negatively gear properties; 900,000 Australians. For people earning more than $80,000 a year it’s around 400,000. So, twice as many people earning less than $80,000 a year, negative gear properties as people earning more.
BOCKING:
That only highlights how much debt they must be carrying, courtesy of the negative gearing. In some ways, that argument can be used against you. The Reserve Bank is worried about people who potentially don’t have the means, racking up the debt, courtesy of negative gearing.
TREASURER:
Well, let me give you some other clear statistics from the Australian Taxation Office. More policeman negatively gear than specialised tax accountants, management consultants or university lecturers. More ambulance operators, ambulance drivers and paramedics negatively gear than accountants. More train drivers negatively gear than solicitors and real estate agents and veterinarians combined. So this is a way for people on medium incomes, or even lower incomes, to be able to get into the property market, in a way that they may not be able to. The second thing is, as the Reserve Bank pointed out in their submission, is that negative gearing actually reduces rents. And of course, lower and middle income Australians are more likely to be renting property than higher income Australians. So if you were to end negative gearing, you would actually see an increase in a number of cities in rents…
BOCKING:
Because those landlords would demand the same return, but because the negative gearing benefit was gone, that return would have to be bolstered by an increase in rent.
TREASURER:
True. Exactly right. There is a lot of misinformation about negative gearing going around.
BOCKING:
That’s right. And I don’t think it’s fuelled prices in the way that some will argue. Because you can negatively gear a property all over the country, but we haven’t seen the same price impact in Perth or Hobart or other places, as we’ve seen in Sydney or Melbourne. Is there an argument to say we put a limit on how many investment properties you can negatively gear?
TREASURER:
Well, tax policy can be a blunt instrument and it is open to the Australian Prudential Regulation Authority that regulates all the banks, to have what are called macroprudential policy tools, where they can say to the banks, listen you’ve got to reduce the amount of money, effectively, they can apply policy that reduces the amount of money that the banks can lend in a particular area of policy - even potentially in a particular city. Now, those tools are available to the prudential regulator in their discussions with financial institutions that lend money. Now that is a more nuanced, a more precise way of dealing with some of the higher property price issues than going down the path of having a really blunt instrument that applies everywhere across the country, that changes behaviour on a longer term basis, and can have some negative impacts for those most vulnerable.
BOCKING:
Tell me, as someone who has done well for themselves, does it hurt at times when you’re accused of being out of touch, comments in relation to housing prices in Sydney and Melbourne?
TREASURER:
Well, look Stuart, done well for myself? You know what, it’s my wife that actually has made the money in our family. She grew up in South Western Sydney and has been very successful in her own career…
BOCKING:
But you’ve risen to the heights of being the Treasurer of the Commonwealth of Australia, that’s through hard work.
TREASURER:
Well, of course it is. But, you know, I don’t turn around and say, I’m a wealthy guy, because I don’t automatically assume that the money my wife has made is mine…
BOCKING:
I know, I didn’t say you were wealthy, I said you’ve done well for yourself. You’re the Treasurer of the country. And I’m asking you, does it hurt personally, when you hear these attacks, Hockey’s out of touch because of the comments he made on house prices.
TREASURER:
Well, you know, there’s swings and arrows in politics. I grew up in a small business family. It was a real estate business that my father started in Naremburn in 1969 and it was a very hard business, the family still runs it. As far as I’m concerned, I speak to my brothers and other members of the family who are involved in the business all the time, to find out how things are going. People can make whatever allegations they want. But you know, I’m not worried about that.
BOCKING:
Now the carbon tax, the ETS, Bill Shorten had this to say yesterday: ‘that story is complete rubbish. Labor will not introduce a carbon tax. It is not in our discussion paper or in our view at all to have a carbon tax. We won’t stick our heads in the sand, bury ourselves in the past and ignore climate change.’ Well of course, those in the Labor Party will tell us that there’s a significant distinction between a carbon tax and an emissions trading scheme. You’re going to tell me a tax, is a tax, is a tax?
TREASURER:
Well, if you apply an increase cost as a result of government policy to a product or a service, then it has an impact of a tax. I’ve never gone down that path of suggesting otherwise. And the fact is, Bill Shorten says the story’s false. Well, it was written by Mark Butler, the President of the Labor Party. And all the quotes there were from a document prepared by Mark Butler. I mean, the story’s written by Simon Benson, but it was actually a Labor Party document and I think that’s what causes Bill Shorten the most grief. It’s a Labor Party policy document from the President of the Labor Party who is also the parliamentarian responsible in this area, and he’s proposing not one, but two new carbon taxes. One on electricity and one on everything else in the economy including motor vehicles. And Bill Shorten’s just being cute, he’s just claiming that it’s not a carbon tax, it’s an emissions trading scheme and it’s another type of tax on something else. The bottom line is, Labor can’t help themselves. They believe they can tax their way to prosperity. It’s wrong. You can’t keep increasing taxes and expect that the country’s going to be more prosperous.
BOCKING:
Is the bigger story here the fact that seemingly, someone in the Labor Party, well up, wants to leak against Bill Shorten the Leader?
TREASURER:
Well, they’re either trying to kill the carbon tax that Bill Shorten wants to introduce, or they’re trying to kill Bill.
BOCKING:
Well you don’t want Bill dead, do you?
TREASURER:
Well, actually, physically, no [laughter].
BOCKING:
No, you know I’m talking metaphorically, politically.
TREASURER:
Well, politically, that’s a matter for the Labor Party.
BOCKING:
Well, go on, you must have a view.
TREASURER:
I’m not going to share it with you.
BOCKING:
Go on, we’re friends.
TREASURER:
We are friends but I think there might be one or two other people listening to the conversation.
BOCKING:
Fair enough.
TREASURER:
Well, I honestly don’t wish that on anyone in politics. I’ll just say, the problem is, you can’t trust Bill Shorten. I think everyone around him, who’s ever known him, anyone that’s ever worked with him, says that you can’t trust Bill Shorten.
BOCKING:
Now the age of entitlement was coming to an end, we had a Budget emergency, how can it be that Bronwyn Bishop has spent $300,000 on overseas travel in one year?
TREASURER:
Well, to be brutally honest Stuart, I don’t know. It hasn’t occupied a lot of my mind...
BOCKING:
There’s white hot anger over it Treasurer, white hot.
TREASURER:
I can understand that. I think the Speaker needs to explain the matter. I think she’s already put out a statement about some of the allegations made…
BOCKING:
Basically, it was that it was within parliamentary guidelines, which can mean anything. One of the expenditure items was a week-long meeting in Geneva, of this Inter-Parliamentary Union, of which we know she was campaigning to become the president. Was she effectively not applying for a job which would have prompted her to leave the Federal Parliament of Australia and using our money to apply for that job?
BOCKING:
We’ll just go back to the Treasurer. Treasurer, I’m sorry about that, there was a problem and suddenly you dropped out.
TREASURER:
It was rather timely.
BOCKING:
I know, it was, it would have suited you if you didn’t come back to me. But I can’t let you get away that easily. So she was campaigning to become the president. Bronwyn Bishop would have left the Parliament. It was effectively a job application, where she’s used our money. Is there an argument to say, that at least that portion of the trip should be paid back to the taxpayer?
TREASURER:
Look, Stuart, when we’re part of international organisations no matter what they are, it is good for Australia to take a leadership role. There are many things over the years that we’ve campaigned for at an international level. The Parliament has its own budget, we give it a global budget, but we don’t micromanage that budget [inaudible] Labor, Liberal, Greens, they fiercely protect the independence of the Speaker and the President in that regard. And there’s a proper process of accountability and I expect there’s a forum of Parliament when we come back in August for these issues to be raised.
BOCKING:
Well you’d wonder whether there is a proper process of accountability, where this sort of money can be spent, and basically were told it’s within guidelines. I recall when you were in Opposition, Tony Abbott was in Opposition, Julie Bishop, there was a call for the then Speaker Peter Slipper to resign over a $900 cab bill.
TREASURER:
Well, they were different circumstances. I mean, he was, I can’t remember if it has been resolved in court…
BOCKING:
Well, it has. The appeal went in his favour, remarkably, the appeal found that the money spent was again within parliamentary guidelines. But there was a conviction at one stage, it was overturned on appeal. But the point is, if we ignore the nuances of the legal side of it, it was the spending that got up people’s nose. That was $900, now I know there was an argument over the way the cab charges were filled out. That was $900, we wanted him gone. This is $90,000.
TREASURER:
Well, again, I can only emphasise, the Speaker is the one that should explain the money and how it’s been spent.
BOCKING:
You’re the Treasurer, ultimately you’ve got to account for these things in the overall Budget. And the point is, you’re the one that’s told us about a Budget emergency, you’re the one whose spoken about ending the age of entitlement, and we discover here after all of the arguments, and this isn’t the first time we’ve had discussions on politicians expenses, I mean, helicopter rides from Essendon to Geelong? I mean, that doesn’t pass any sort of sniff test does it?
TREASURER:
Instinctively, it doesn’t. But I want to emphasise that again, you know, we’ve gone on about politicians’ entitlements over the years, from politicians controlling them and people saying you need an independent remuneration tribunal. Well, the independent Remuneration Tribunal now sets those entitlements. And if there’s a suggestion that politicians should take over those entitlements again, I would argue against it, because effectively, it goes back and forth between the independent tribunal and the politicians. We have an independent Remuneration Tribunal. In the 2014 Budget we announced we were going to work with the Remuneration Tribunal to simplify the travel entitlements and make sure there is proper accountability in place. The reason why this has all been found out, is because there is proper accountability in place. When it is an excessive amount of money, or for an inappropriate use, the individual Member of Parliament has to explain it, and the court of the people will make a decision.
BOCKING:
Well the court of the people are making a decision. I mentioned earlier on, four people, the Peninsula Hotel in Hong Kong, now it’s all named on there, the Rolls Royce, you name it. All meals, all drinks, basically camped at the Peninsula in Hong Kong for two weeks. $65,000, that’s not cutting any corners. This is $90,000 of our money.
TREASURER:
Well, yeah…
BOCKING:
And your money. With a Budget emergency and the age of entitlement over, it’s not a good look is it?
TREASURER:
Well, it is not a good look. It is not a good look. And I think that the Speaker needs to explain it. I don’t know whether all the Speakers of the Parliaments were at that hotel in Hong Kong, I don’t know…
BOCKING:
No, well the Hong Kong example was a private example I’m giving by way of comparison. I’m giving that by way of comparison.
TREASURER:
I’ve got to be honest, I mean, I’ve been focussing on what’s happening in Greece, in China, on tax reform. I’m not saying this is trivial at all. But I think the Speaker needs to explain it all, Stuart. I’m sure she’ll come on your program, or think about coming on your program to explain it.
BOCKING:
Because you were calling on Peter Slipper to resign, there are people calling on Bronwyn Bishop to resign.
TREASURER:
Well, they’re entitled to do that. But I also think Bronwyn Bishop has the opportunity and should have the opportunity to explain exactly where the money went and what it was for. If it’s about participating in international activities well, it’s a bit like the Australian cricket team or anyone else. If you’re representing Australia you’ve got to engage internationally. I mean, there’s no avoiding international travel. I mean, I had to go to Beijing for a day, two weeks ago, for one day, I was there for hours. I would have much rather not sat on planes for two-and-a-half days to sit there for a half day meeting. In my case, if you can avoid international travel it sounds pretty good to me. But having said that, I don’t know the circumstances upon which these bills were accrued.
BOCKING:
Alright, well I appreciate your time this morning.