TREASURER:
Well, thank you so much, Laurie and to your new sponsors at Westpac, I notice we've got two new ATMs up here and to my colleagues, ladies and gentlemen, thank you so much for coming along to hear a bit more about our economic plan for Australia. And it is important to remember where we started at. When we were in the deep, dark days of opposition, we thought very carefully about the economic plan that we wanted the Australian people to have and we developed that economic plan after extensive consultation with the Australian people. We recognise that there was always the potential for head winds and there could always be disruption, because the world economy is changing and so is the economy here in Australia. We, thank God, had a fantastic mining boom, a mining construction boom which helped us to get through the global financial crisis and we had almost insatiable demand for our resources, in particular iron ore. But when we came to government we had to make some difficult decisions, and I know they were unpopular, but we did what was right. We had to make some big calls, not writing out cheques to businesses that were in financial distress. Also, we had to make some difficult, but appropriate calls in relation to the Budget.
There was never any doubt in our mind or my mind that the mining tax and the carbon tax had to go and the associated expenditure with those programs. There was no money in the mining tax, but there was a hell of a lot of expenditure associated with it. And we inherited a government that was haemorrhaging around $133 million a day, that's how much the Government had to borrow to pay the daily bills. We've got it down to $96 million a day and we've got a long way to go, but we're heading in the are right direction. We inherited a deficit of $48 billion. Over the 4 years, $123 billion, and over a four year period we've got that down to $82 billion, but still we've got a long way to go. And importantly we've got a credible path back to surplus. It's a measured path. It runs at the same timetable as last year, but it gets us back to the point that we live within our means. Spending is still too high, we fully recognise that, but importantly we've got to get the balance right and our economic plan has been able to cope with some of the challenges that we've faced as a nation over the last 12 months.
Since coming to office we've received $90 billion less in revenue than we would have expected, $90 billion. In the last 12 months alone, since the last Budget was delivered, we've lost if you like to use that term, $52 billion in expected revenue and that does have an impact on the bottom line. Now, we could increase taxes on the Australian people to recover that lost revenue, but that's the wrong formula at this point. We certainly want to make sure that Australians have the chance to invest and grow their businesses and hitting Australians with new taxes is not the answer. So our plan has been flexible, our plan has been measured; our plan has been able to cope with the head winds. When I came back from the G20 meeting and the IMF meeting in Washington, I came back more optimistic about the global economy. As the chairman of the US Federal Reserve said, the United States is near full employment. Sooner or later the United States is actually going to have to start getting some wage growth that is going to empower that massive consumer class in the United States. It's still the biggest single economy in the world and it's a big trading partner of ours and that's very encouraging. This time last year, various analysts suggested there was a 50 per cent chance the Eurozone would go into a recession. Now despite the troubles associated with Greece, Europe is actually growing and the work of Mario Draghi and the Central Bank in Europe has made a difference and you're starting to see positive signs partly on the back of lower oil prices, but also on the back of a lower euro, as well. Japan, after a long period of effective stagnation, now it's starting to grow again. It's still a major trading partner of Australia. Abenomics seems to be working, the third arrow seems to be in place and that's encouraging, as well. Of course, many people just keep misreading China. I'm not as bearish as many others about China. Why; because China must grow. Beijing needs to make sure that their country grows to create the jobs that ensure it does not have social dislocation into the future.
So I am far more optimistic about China and China is our biggest trading partner. You know, this morning I was reflecting on that relationship a little bit more. As a young boy at the age of about 13, I was privileged enough to have my parents drag me along on a tour of China and it was one of the first tour groups to go into China in 1978. It was pretty amazing. Beijing had no building more than four storeys high. Everyone seemed to be wearing green suits or blue suits, and everyone was on a push bike rather than a car. You know, what I remember about it was people coming up to me and pinching my cheek as a young boy, because that generation had never seen a white person before and they were wondering about the colour of my skin. But you know what; trade at that time, two-way trade between Australia and China was just $700 million. Today, it's $140 billion. Beijing and so many other cities have been built with Australian steel, using in many cases such as during the Olympics, Australian know-how. China has undergone a massive transformation. So much so that when I was at the New York Stock Exchange the other day, the head of the Exchange reminded me that the biggest initial public offer, the biggest public float in the world ever was AliBaba, a Chinese company, and the mission of that Chinese company in a still socialist state is to empower small and medium-sized enterprises in China to export to the world. How about that? What a turnaround. This is the opportunity for Australia. We have our AliBabas, we have our Facebooks, we have our Ubers, our Air BnBs. They are out there, we have to give them a go and from my perspective, it is very real.
The work of Andrew Robb in negotiating those free trade agreements has been outstanding. Where there have been road blocks he has broken through them, and to have free trade agreements with China, Korea and Japan with potentially another, with India and many more to come, we are breaking open the doors that give Australians future jobs, give Australians future opportunities, give Australians a chance for a more prosperous life. And it comes at a cost to the Budget, $6 billion, but it is a damn good investment and why; because we win out of that relationship. And I'll give you one example; Peter Freedman from Rode Microphones who I understand is here today. I went to his advanced manufacturing business in western Sydney. What a great story. Started the business in the 1980s, sells over half a million units in 100 countries. In fact, a number of the microphones here on the cameras are Rode Microphones and you know what, under the free trade agreement we negotiated with China, the tariffs of 10 per cent on microphones are being abolished and he sees blue sky opportunities to expand his business into China. Potentially employing hundreds of people in advanced manufacturing. These are the great stories, these are the great possibilities. It's not just about Rode Microphones, it is just as much [inaudible] from Queanbeyan Central cafe where I went the Peter Hendy the local member just not long ago. It's a family business, unincorporated, 20 staff from seven different countries. How good is that? Twenty staff from seven different countries. He wants a fair go, he wants to invest and under our proposals in the Budget, he can. It's an opportunity to go out and buy that new machine that may improve productivity. Maybe buy heaters, maybe buy new tables and chairs. After all, the tax we collect is his money and the money belongs to every single Australian. So when we introduced a $20,000 accelerated depreciation initiative last night, we were giving small businesses the chance to bring forward the accelerated depreciation they were already going to get, but this is a huge impact on their cash flow and if they can buy that piece of machinery now, that means they might be able to buy even more important and significant machinery in a year or two. It speeds up the development of the Australian economy and with the tax cuts of 1.5 per cent for unincorporated businesses and with the 5 per cent tax discount for unincorporated businesses, we're giving people a fair go. We're giving them the chance to have a go and that's hugely important. And that's going to stimulate innovation. We've got some terrific stories in Australia. Look at Atlassian. When I met Scott Farquhar not long ago with Paul Fletcher, I was astounded that this company, which started not too long ago, just a few years ago in Sydney, two guys starting with a $10,000 credit card, the company is now estimated to be worth $3 billion. It hasn't listed yet, but apparently it already has 90 Australian shareholders that are millionaires as a result of the performance of this company. Exporting Australian IT to the world, to the world. And then I was embarrassed, I tend to be from time to time, I was sitting down with a fella talking about how my little boy loves Mathletics. Anyone with young children is familiar with Mathletics. It’s where kids as young as 4 and 5 go onto this program on the Internet and they learn how to count and they actually compete with children all over the world and I was astounded at this initiative. In fact, my 8-year-old worked out if he got up at 5 o'clock in the morning and he was fast enough, he could actually be the best in the world at maths, for about 30 seconds.
Well, I love Mathletics; it stimulates the brain for the kids, it's a hell of a lot better than the other stuff on the Internet. You know what, 4.8 million students around the world use this and I didn't realise until three weeks ago that the guy that started it and the business that runs it is 100 metres from my office in Sydney. This is what we can do. We can export to the world. We've just got to think about it and we've got to facilitate it, and the world is changing. New businesses are emerging every day. Facebook, the biggest media company in the world doesn't employ one journalist. Uber, the biggest taxi company in the world doesn't own one cab. Air BnB, the biggest hotel vendor in the world doesn't own one hotel room. This is a changing nature of our world and we as Australians are on the threshold of our greatest ever era. Why; because we're in the time zone of growth. The Asian time zone - where we're seeing the emergence of two billion people in a middle class. They want what we have the capacity to give them. Better health care, better education, better accounting and financial services, better IT services, better legal structures. We can do it. We have the best in the world. 70 per cent of our economy is services, yet it's only 17 per cent of our exports. Mining and resources are 10 per cent of our economy, but are around 55 per cent of our exports. So if we can lift that other 70 per cent of the economy in services and also lift advanced manufacturing as well, and lift agriculture as well and advanced agriculture, we can export to the world and we will become a far more prosperous nation. For that I have no doubt, but we can't leave anyone behind. We can't leave anyone behind on that march towards our destiny.
This morning I spoke to Cam Rowntree. Barnaby Joyce and I went up to Walgett to visit him on his farm. I must say he was in some level of despair this morning. He's a very good farmer, a very good farmer and yet the rain has hit the north of Walgett, south, east and west, but not that township. We've put $333 million into drought assistance in this Budget and that's a huge step forward, but also as a forward-thinking measure we're focusing on how we can do more. And, of course, if we could drought-proof the nation they'd help everyone. We'd get a more reliable supply of produce to market, but most significantly it's also better for the environment. So we have put in place a number of initiatives that will help with drought preparedness as part of our upcoming agriculture white paper. Importantly, we are accelerating depreciation for water storage and also fodder storage. We're also, as I announced last night, which is something that I understand is very popular with farmers, is allowing them to write off instantly their spending on fencing, which means that you're going to get better productivity out of the land, but also importantly you're going to get best pest control, particularly with wild dogs. And, of course, we can't leave the farmers behind in our ambitions for the rest of Australia. We need to make sure that every part of Australia comes along the journey and last night we announced a significant jobs package and also a restructuring of existing programs. In particular, we want to help young Australians that have fallen through the cracks and this building, everyone wants to help in that regard, no matter what your political colour, I know that. But the people that know it best are the people on the ground providing community services in those high unemployment areas.
And I give you an example of Father Chris Riley; many of you would know Youth Off the Streets. The money we allocated last night over $300 million for all the youth programs and for the programs that are associated with people who are most vulnerable, we are targeting people like Father Riley and others who are on the ground giving them the financial flexibility to be able to strengthen the infrastructure of the community where some of the infrastructure has simply broken down. That can be mentoring services, training services, education services and the like. We're also reformatting the $1.2 billion of wage subsidies. The restart program I announced last year is being accelerated and being made more flexible to deal with some of the challenges at hand.
Finally, I just want to say something about New Frontiers. Northern Australia is one of the most exciting opportunities for Australian growth into the future. Northern Australia is vast, but it has enormous potential. It has an abundance of water. It has an abundance of fertile land. Most significantly, it doesn't have the infrastructure to make it all happen, so last night when we announced a $5 billion major infrastructure facility, it was focussed on partnerships, not writing out individual cheques, but partnerships with state governments and the territory government and also with the private sector to build the infrastructure, to build the ports and the railways, to build the pipelines, to build the major infrastructure that is going to open up the great north. It is a step forward and we'll have more to say about it in the not too distant future, but I want to say to you, we are endeavouring to build the opportunities. Australia is on the threshold of its greatest ever era, there's no doubt about that, and as a great exporting nation and as you can see from the Budget forecast we are expecting exports to increase. As a great exporting nation, we are on the threshold of an era of opportunity that our parents could never have dreamt of; could never have dreamt of. When our family opened up a small business back in the '70s, everyone thought you need to convince someone to come in the door by the display in the window out the front, convincing people to come in the door like a salesman, as they should, and then one day someone invented the Internet and it started to change. And all of a sudden you're a salesman or a saleswoman to the whole wide world. Everyone is a buyer, everyone's a potential purchaser and everyone's a potential vendor.
So this Budget is a step further in our economic plan to future proof the nation. This Budget is a step forward in ensuring that Australia has the very best opportunities. As the world changes, as the economy globally changes, as the Australian economy changes I have absolutely no doubt that we are better prepared as a nation today than we were two years ago because of the decisions made by the Government, but significantly by the contribution made by the Australian people to that journey to rebuild the nation and give every Australian the opportunity for a better life. Thank you very much.
LAURIE WILSON:
Thank you Treasurer, time now for our usual round of questions from our media members. We've got a long list of journalists; I think some 20 on the list who'd like to ask a question. We probably won't get through all of those, but I would ask our media members to keep their questions reasonably short and try not to ask more than a single question. We'll start with Laura Tingle from the Australian Financial Review. It looks like she's probably got two questions to start with, maybe not.
QUESTION:
Me, never.
TREASURER:
Two? It could be three?
QUESTION:
Okay, well, I think it's official approval, in that case. Treasurer, one of the biggest savings or in fact the biggest single saving in last night's Budget was from not proceeding with the Prime Minister's Paid Parental Leave Scheme, which the Budget paper says results in a reduction of $10.1 billion over five years. When you originally proposed this you were suggesting it would actually save some money. At what point of time did you become aware that the Paid Parental Leave Scheme was going to be costing $2 billion a year? And I'll ask one second question, which is, just you didn't mention in the Budget last night what's going to happen to the pharmaceutical co-payment and I just want you to confirm that the current legislation will stand in the Senate?
TREASURER:
The current legislation still does stand in the Senate, absolutely right and obviously we are negotiating an agreement at the moment with the Pharmacy Guild and other stakeholders in relation to the pharmaceutical agreement. We have provision for it, but an agreement in relation to that hasn't been finalised yet. And in relation to the Paid Parental Leave Scheme, of course there was an extra year that comes in to the PPL numbers which was not contemplated back at election time, because you put out four year forecasts, but over time the PPL would have had some behavioural changes, but we stand by the numbers that are in the Budget last night.
LAURIE WILSON:
Our next question from David Crowe.
QUESTION:
Thanks Laurie. G'day Treasurer, David Crowe from The Australian. I have a question about part of your speech from last night where you said there will be no new taxes on super under this Government, and I will preface my question by naming some organisations that do think there needs to be a look at super and a retirement income review. That includes the National Seniors, Council on the Ageing, ACOSS, Chris Richardson from Deloitte Access Economics and John Daley from the Grattan Institute. Now, do you accept that there is any argument for a retirement income review? Is your statement last night a never-ever statement on super taxes? Are you at least keeping open the option of adjusting existing taxes even if you don't apply new ones?
TREASURER:
David, we want to give stability and certainty to superannuants at this moment and the governor of the Reserve Bank said quite recently superannuants are facing a period where they're going to get lower returns than they expected because of lower global interest rates, and the return on investment tends to be lower at the moment globally than it's been in previous years. So now's not the time to hit superannuants with higher taxes and it's wrong to do so and it is a clear point of difference between the Coalition Government and the Labor Party, which does want to introduce new taxes on superannuation. We mean what we say. In relation to a retirement income review, the retirement savings system is far more complicated now than it was when Paul Keating, to give him credit, initiated it back in 1992. I mean life expectancy then was around 72. Today it's closer to 84. By the middle of the century it'll be close to 100 and it is also the case that superannuation now interacts more and in a more complicated way with the pension system, the age care system and also private health insurance. That was never contemplated a few years ago. I think at the moment we have our fill of reviews. We've got the Federation white paper which the Prime Minister's working through with the State Premiers and Chief Ministers. I have a tax white paper which will start releasing key discussion papers in response to the feedback from the community over the next few months. Importantly, we are thinking about how we can provide stability and certainty for people and changing the taxation regime for superannuation is certainly not the answer. And having a review at this point of time is certainly not the answer either.
LAURIE WILSON:
Can we assume that's not never-ever though? I mean downstream you're saying it is always an option.
TREASURER:
Oh geez, never-ever. I've heard that line before.
LAURIE WILSON:
Well, that was the question that David asked.
TREASURER:
We have no plans to have it reviewed.
LAURIE WILSON:
Next question Louise Yaxley.
QUESTION:
Mr Hockey, Louise Yaxley from ABC Radio. You said spending's still too high. You've indicated very strongly that the contentious $80 billion isn't coming back as far as you're concerned and reinforced that, but the states are pretty insistent arguing that the education for example is going to boost productivity which you also make as a priority. What do you say to the states when they come here for the retreat in July when they're going to keep pushing for that, is there any point to it, and what can you offer them if you're not going to come to the party on that?
TREASURER:
Well, we are always prepared to work with our good friends in the states; always. And, you know, frankly, when the previous government promised additional funding for schools, the Gonski reforms, we committed to the four years in the forward estimates but said there's no money and we were right, after that, because they never funded it, the previous government. And in relation to hospitals, again, unfunded promise from the previous government, no money there. And we're keeping the National Disability Insurance Scheme and we are supporting it. Even though as you can now see for the first time in the Budget that a large chunk of the National Disability Insurance Scheme, a really important scheme, is unfunded, despite the protestations of the previous government. So we can't continue to give bonus payments when we haven't got the money to do it and by the way, a number of the states have a better balance sheet than us, they're in surplus a number of the states. So they run the hospitals, they run the schools, that's their primary responsibility. Having said that, we are increasing our funding on health by 6 per cent in real terms over the next four years. And we are increasing our funding for education by 6 per cent in real terms over the next four years; we just can't afford to give out bonus payments.
LAURIE WILSON:
Tory Shepherd.
QUESTION:
Treasurer, Tory Shepherd from The Advertiser, which is the middle bottom bit. Did you forget about South Australia in your Budget, because everyone else got a bit of something and South Australia kind of missed out?
TREASURER:
Well, I don't think that's right at all. I mean this is a Budget for all Australians and as you know Tory, I was in Adelaide just a few days ago and the last speech I gave before I delivered the Budget was in Adelaide and in fact I met with the editors of your newspaper so I can't believe you forgot that, but… you want cash [laughter]. Take a numberer Tory, take a number. We want Adelaide - look, can I just specifically direct this at Adelaide and South Australia? As I said when I was down there, I am very bullish about the future of South Australia, why; because you have it. You've got the capacity to do it. You've got a magnificent lifestyle, a fantastic export industry, in for example the wine industry and getting rid of the tariffs on wines that Andrew Robb negotiated and the free trade agreements is outstanding for South Australia. Quality produce on a range of different things and yes, you've got a huge amount of energy, uranium in particular, and resources, and by god I love going to Kangaroo Island as well and parts of South Australia, like Mungerannie, which I bet you've never been to, but I have and places like that, it is a fantastic state with enormous potential. But also it's a state that should start to believe in itself and unfortunately you got a Premier that keeps talking you down but I actually believe with my colleagues from South Australia that there's huge upside opportunity in that state. And we're investing last night in the whole of Australia; no part of Australia is left behind by what I said last night and in particular South Australia.
LAURIE WILSON:
Our next question from one of the club's directors, Mark Kenny.
QUESTION:
Mark Kenny, Mr Hockey, also formerly from Adelaide.
TREASURER:
Well, you'd agree with everything I said Mark, wouldn't you?
QUESTION:
Most of it.
TREASURER:
Sorry the bit about the South Australian Government you disagree with?
QUESTION:
Well, I'm going to sit on the fence on that one. That's what I do. Can I ask you about your accelerated depreciation initiative you announced last night, the $20,000 write-off that you're giving businesses for plant and equipment that they buy? When Wayne Swan had a similar scheme I think it was for $5,000 instant asset write-off, the opposition then was quite critical of it and then you got rid of it. You said yesterday that was partly based on the fact that it was funded by the mining tax. Can I ask you what is your scheme now funded on given that the Budget still remains about $40 billion in deficit this year, so what is yours funded on if his was funded on a tax that didn't raise any revenue?
TREASURER:
Well, I'll tell you what it's based on; it's based on good policy and the fact that we have actually improved the Budget bottom line. And we're not tying it to any particular initiative that is funding it. In addition I just might add that in the Budget I delivered last night if it was delivered under the previous government there would have been an extra $5 billion of tax collected by the previous government, so we've cut taxes overall, but that $5 billion we're giving back to small business, giving them the chance to invest in their own effort in their own innovation. But the fundamental problem was that the previous government announced taxes that didn't raise any money and if I could just add the point, the reason why - and I see the tax commissioner here - the reason why I didn't put a dollar figure in the Budget on our crackdown on the 30 multinationals that are not paying their fair share of tax is because it's going to be complicated and hard to get the revenue out of them but we actually have the best anti-avoidance laws pending in the world. We have them now, we've got stricter laws, but I'm not going to count the dollars before they've come in. And that's what the previous government did. They had a mining tax they thought they were going to get billions of dollars out of. When iron ore was $180 a tonne. Gee, I wish it was there. It's $48 a tonne in our Budget, it's around $58 a tonne in the markets today. But I'm not going to bank money that I haven't received. I'm not going to spend against money I haven't received, so that particular initiative comes out of our general revenue.
LAURIE WILSON:
Malcolm Farr.
QUESTION:
Malcolm Farr from News.com.au Treasurer; thanks for your address. You've acknowledged the dangers of bracket creep, you said one way to counter that is to cut spending but there's not a heck of a lot in the Budget there, is a lot of revenue growth and that's going be - a lot it is going to be paid for by people who work hard and pay more tax. What can you do to reassure them they won't fall into the bracket creep trap? Is that an item you would hope to have on your white paper?
TREASURER:
Yes, yes. Look, the fact is bracket creep, when people move into higher thresholds and higher marginal tax rates, it actually slows the economy. It slows the economy. It's a disincentive for people to work and over time the more people that go into higher tax brackets, becomes a downward spiral for the economy. Now, as we did last year, we've built in a cap on what we expect revenue to be, which is a discipline on us and on any future government to reduce expenditure as a percentage of GDP. And as you can see we're reducing it every year and the bottom line is consolidating by about half a per cent of GDP every year, which is roughly the same speed as last year, last year was 0.6 per cent of GDP, each year, this year's it's 0.5 per cent. But there's still more work to be done to reduce government expenditure. We are facing enormous external pressure when it comes to competition and tax rates, whether it be a corporate level or be it a personal level, our main competitors in the region and even around the world have much lower tax rates, for example the United Kingdom has a company tax rate of 20 per cent, and we're at 30 for our major companies and obviously from last night's announcement we're going to 28.5 for businesses with a turnover less than $2 million so that's a start but we're going to have to go further to remain competitive. Money is very global and obviously it's very moveable, it's fundable and we've got to be competitive along the way and certainly tax creep is going to cause or bracket creep is going to cause untold problems in the future unless it is properly addressed by government.
LAURIE WILSON:
Sophie Morris.
QUESTION:
Sophie Morris from The Saturday Paper. Treasurer, when you were here last year you spoke of your correspondence with Margaret from Langwarrin and how she'd written to you urging you to say the course, make the tough decisions to repair the Budget, have you written back to her to say, sorry I couldn't do it Margaret, it was too difficult, I've put it off and do you feel you've disappointed her?
TREASURER:
No, no, not at all. And she is a serial writer too. She's a lovely woman. And even though I haven't spoken to her for a little while she's been sending a lot of letters and they're very lengthy. They're all full of good advice.
LAURIE WILSON:
It does beg the question but I might go to the next one, Mark Reilly.
QUESTION:
We'll tweet our email addresses to Margaret so she can contact us now Treasurer.
TREASURER:
Please. Just give me your home address and she can send them there.
QUESTION:
A lot's changed from last year to this. It's a bit like entering a parallel universe, but after last Budget the Prime Minister seemed to warn that if key measures weren't passed by the Parliament there could be a double dissolution election, key measures weren't and of course there wasn't. This year there's a suspicion that if this Budget is passed there could be a double dissolution election. What do you say to the analysis this morning that if this spending does turn the electorate in your favour that the Government might rush to the polls in the next three months or can you give a commitment to run full term?
TREASURER:
Well, it's amazing how the worm turns isn't it, the point you're making. Just as last year there was no desire to go to an election there's no desire this year, we're actually focussed on doing what is right. We're focussed on doing what is right. I mean this is an easy allegation from various people, but, you know, my colleagues, I look around at my colleagues around here, there is not one single person that came into this place wanting to do anything other than make Australia better. And you don't give up Government easily, I mean, by god you don't. I've lost Government before; it's a painful process in opposition. We worked hard to earn the trust of the Australian people. Damn hard to get back, you don't give it up easily. We've got unfinished business for the nation. And the Budget that I announced last night is another step along that path and the Budget was for the Australian people, not for us, it was for the Australian people, as last year's Budget was for the Australian people. It genuinely was. We're endeavouring to do our best to fix the mess that we inherited and yes there were parts of it that were unpopular, yes, we heard the reaction of the Australian people, but it wasn't motivated by anything other than a desire to do what is right for the nation. And that was heartfelt and genuine as it is with this Budget today.
LAURIE WILSON:
Our next question from Lenore Taylor.
QUESTION:
Lenore Taylor, Guardian Australia, Treasurer. You said that the child care package from last night's Budget depends on the passage of the cuts to family tax benefits from last year's Budget. How do you enforce that link in practice? Do you sit down with the opposition parties and ask them what alternative savings they might come up with and how open would you be to their suggestions since you've ruled out some of the other savings they've put up? Given that the child care package doesn't take effect until July 2017, is that link actually more sort of rhetorical than a practical thing?
TREASURER:
Well, no, Lenore, we are endeavouring to make savings in order to pay for other initiatives. I refer you back to the Intergenerational Report, which identified that one of the ways we can help to grow the Australian economy is to increase female workforce participation. If we could increase female workforce participation to the same level as that of Canada we would effectively be adding a city the size of Newcastle to the economy every year. At the moment Australia just simply hasn't got the same level of female workforce participation as we could have and that would help the Australian economy. 165,000 parents were identified in the Productivity Commission report as wanting to have more flexible, more affordable child care, but it isn't available. So the package that we've developed, and Scott Morrison's done an excellent job in this regard, a $3.5 billion package is focussed on making child care more accessible, more affordable and more flexible. We have to pay for that somewhere. On the one hand people say, suggest that we've lost control of the Budget and we're spending too much money, but on the other hand when we actually say this is how we're going to pay for it and it's a package they say we want the spending, but we don't want the savings. It's not going to work like that, it can't work like that. We are prepared to sit down with anyone who is sensible in the Senate and show them that in order to pay for new initiatives you have to make savings. When I became the Treasurer and after the new Senate came in, I opened the whole of Treasury to all the Independents in the Senate and I offered The Greens the same. I said come in, sit down with the Treasury, come down to the Treasury offices we'll show you the full balance sheet of the Commonwealth so that you can see the challenges that we have, that the nation has in going into the future. Some of them came, some of them spent a few hours, some didn't come at all and on one occasion didn't even return our phone calls. So we're trying our best, but ultimately what we want is the best outcome for the Australian people and we want to make sure that if we're spending new money we're saving money and Mathias has done a fantastic job in managing that, particularly managing our colleagues, because it is difficult, but also it is hard to actually ensure that at the end of the day any new spending is fully offset by new savings and my colleagues have been incredibly supportive of that process, as well.
LAURIE WILSON:
Kieran Gilbert.
QUESTION:
Treasurer, Kieran Gilbert from Sky News. You've mandated Netflix and Google to collect GST when consumers buy digital products. Why didn't you take the opportunity to collect GST when companies advertise on the same platforms?
TREASURER:
To collect GST when they advertise on the same...
QUESTION:
When companies advertise on Google, Facebook or whatever else. My understanding is you could make hundreds of millions in revenue from it?
TREASURER:
Well, let me just be clear. The two initiatives that I announced last night; the first initiative is a multinational tax, anti-avoidance law, it's a rule that strengthens up the anti-avoidance powers of the Australian Taxation Office and gives us the capacity to chase down the movement of profits and there are about 30 multinationals that are moving money from Australia to Singapore, to Ireland, to the Netherlands, back to Ireland, to the Cayman Islands or Bermuda or wherever it may be. Now the Tax Office has been embedded in their businesses for a number of months and has been able to identify how much has moved. But the tax liability associated with that is far more complicated. That's the first thing, and what we're going to do is where they earn a profit in Australia, then we're going to make sure they pay tax in Australia. That's the first thing. The second one that we announced was in relation to digital downloads, where there is a company overseas with little on the ground presence in Australia that is selling games and iMovies and other things without mentioning iMovies, into Australia and they're not charging GST, which disadvantages Australian providers who have to charge a GST. Those companies are willing to charge a GST. That's been a global effort. We did that through the G20 last year and the OECD. It's on what's known as the base erosion and profit shifting plan of the OECD, and those companies are actually agreeing to the demands of individual countries including and collectively the Eurozone which has imposed such a tax. So one way or another through a pincer movement either through global action or local action, we're going to do our very best to make sure everyone pays their fair share of tax.
LAURIE WILSON:
Question now from Colin Bettles.
QUESTION:
Colin Bettles from Fairfax Agricultural Media. Mr Hockey, as you know, the farm sector is one that faces a lot of volatility due to the weather and markets and it also faces political volatility, as we know. The agricultural white paper that you promised to deliver is going to be a tool that will help to provide some better business planning measures for the sector. The farm sector today has welcomed your speech yesterday and the mentions of farming and agriculture saying that there was probably more mentions in it last night than all speeches from Treasurers dating back to Federation was one comment this morning. But now that you've raised expectations and you've still got some more negotiations to go, are you confident you can actually deliver a policy document that provides for a modern agriculture environment to back up the free trade agreements that you've got and others that are coming up? And on the back of that, are you also confident that it's something Labor will adopt when it comes into government given that you also cut $30 million for their food plan from the Budget last night?
TREASURER:
Well, I'd just say to you, farmers have to deal, as you correctly identify, with incredible market volatility. Some things are terrific. Beef prices are great at the moment and partly that's on the back of a drought in Brazil and also drought in California, but thankfully to their credit they're coming out of that, but having said that if we can provide stability and certainty in relation to individual areas, then that's going to help a lot of farmers. I'll give you the example of fencing. A lot of farmers have described fencing for tax purposes as repair, because then they can write off the cost in an individual year. If it is new fencing it has to be written off over a number of years, but there seems to be a lot of farmers that are repairing fences and not building new ones. So it was common-sense to say, okay, from an environmental perspective, because you can have cell farming and from a land management perspective, you can have instant write-off, now we've still got to fine tune that, but it's happening. It's going to happen, right, and that is just a simple initiative that makes a difference. For the other initiative we announced last night in relation to small business, you don't have to pay fringe benefits tax if you have multiple mobile devices. That's common-sense. I mean, some businesses a farmer might be employing someone and gives them a mobile phone and then gives them say a tablet with a whole lot of data on it. They have to pay FBT on the second device. In the digital world that's crazy and we're going to look to extend that further, as well. So those little things make all the difference, on top of what we're going to be announcing in relation to agriculture. I want you to know, the Prime Minister is very tuned into this, Barnaby Joyce is the most enthusiastic Agriculture Minister I've seen in my time in this place, there's no doubt about that, but we've got to get it right so it works for all farmers and gives them all the opportunity to be better farmers. I might add one of the best areas of R&D and productivity improvements over the last 30 years has been in farming. There've been pioneers in R&D and productivity improvements. I think we've got the best farmers in the world and we want to back them.
LAURIE WILSON:
Michelle Grattan from The Conversation. Mr Hockey you've been very dismissive of suggestions that the accelerated depreciation could lead to some rorting of the system. What sort of safeguards do you think can be built in to ensure that this is not so beyond just the normal tax rules and regulations? And on the subject of possible waste, do you think in retrospect you should have done more due diligence on the advertising campaign for the Intergenerational Report?
TREASURER:
Ah, no. The campaign I understand has been very successful and starting a national conversation about the challenges that lie ahead and, in fact, we've had a discussion about how we can improve workforce participation and how we deal with an ageing population and that has accelerated that conversation and the feedback has been enormous, so there's no apologies at all about engaging in a conversation, and you're from The Conversation, engaging in a future with the Australian people about the future. I make no apologies for that. In relation to accelerated depreciation; businesses already depreciate the goods they buy and instead of depreciating it over a number of years they're going to be able to do it immediately.
They still have to spend the money and it doesn't mean they get 100 per cent of every dollar they spend back in their pocket, because it is a discount on their tax liability, so they've got to be paying tax and they've got to have a reduction in their tax liability, so it's a bring forward of the write-offs that they would have got at any rate and why are we doing that? Because we want them to go out to invest to improve their cash flow as well as grow their businesses. We have strong measures that ensure that there is no rorting. I have absolute confidence in them and I'm sure the tax commissioner does as well and if there's anything to suggest that there will be rorting we'll follow up on it, but this is a normal business practice to have depreciation. It happens in every business, all we're doing in this instance is bringing it all forward and they're getting their money back quicker so that can help with the cash flow so they can employ more Australians.
LAURIE WILSON:
Andrew Probyn.
QUESTION:
Treasurer, Andrew Probyn from the West Australian. You can disregard Tory's question, you worry about WA, that's the big bit to the left. See, they all agree. I'm going to spare you a question on GST today, I just want to turn to, there's an alarming graph on 511 in Budget paper one, where it points to a $20 billion increase in social security and welfare spending. Now that's mostly in NDIS. So you're asking us to believe you can somehow find $20 billion for the NDIS while shovelling away $20 billion for the medical research fund. I ask, are you part of a bipartisan fib here that you can somehow find an extra 3 per cent, equivalent of 3 per cent of the Medicare levy to fund the NDIS and are you brave enough to say that you can't?
TREASURER:
Well, I think your numbers are a bit all over the shop there, Andrew. With due respect, I know you've got the Budget papers in front of you, but let me finish. The Medical Research Future Fund is based on the savings profile from last year's Budget and when we put money into the Medical Research Future Fund it is the equivalent of savings moving from one account to the other in the Government. It only hits the balance sheet when you appropriate out of that fund, so actually by building up that fund we then through our investments run by the Future Fund, we get a return on that $20 billion and it's only that return that is appropriated and it's $400 million over the next few years. Because one of the concerns of a lot of medical researchers is, year to year they've got their hand-out asking for money. I mean the NH and MRC only approves 15 per cent of applications and medical research is one of the great stories that Australia has, one of the great stories and if we can find those cures it's going to be a game changer and I just apropos that, I was with Charlie Teo the other day and what stunned me is when it comes to brain cancer, there has been no change at all in the mortality rate for brain cancer over the last 30 years. None, no improvements at all, and brain cancer is the biggest killer of children in Australia. Come on. Really? This is what that Medical Research Future Fund is about and - at any rate, in relation to NDIS, we are committed to it. We haven't fully funded it yet, but we've got work to do, because we want the NDIS to work. We want it to work. I know Mitch Fifield is working closely with stakeholders in that regard, but also it is something we're going to have to continue to work to fund and we expect there'll be bipartisan support when we're able to work out what the exact cost profile is over the medium term of the NDIS. So there's more work to be done.
LAURIE WILSON:
Question from Colin Brinsden.
QUESTION:
Treasurer, Colin Brinsden, AAP. Given your second Budget is aimed at jobs and growth, why is the unemployment rate still going to be rising next year? Why is growth going to remain below trend? Don't you have faith in your own policies, or would the economy be worse off without them and dare I say, heading into a recession?
TREASURER:
We're not going to go into recession unless the world collapses and then we'll have many other problems. We're on a trajectory for stronger economic growth. We are. The world's economy is getting better and we've got record low interest rates. We've got lower electricity prices, we've got lower petrol prices and importantly we're seeing export growth and, in fact, we're at a Westpac-sponsored dinner. Bill Evans of Westpac said last night that our forecasts are perfectly credible, as did a number of others and they're broadly in line with the Reserve Bank as well, so I have absolute confidence in our forecast based on the information we have today. In relation to growth and unemployment, the reason why unemployment ticks up marginally and, in fact, there is a more positive story about unemployment in the Budget than there was previously. The reason why it ticks up is because of the head winds from what's happened globally and the impact on economic growth. Having said that, I've been encouraged in the early part of this year, job ads have been strong. You're also seeing good growth in retail; you're seeing excellent housing construction data. I have great confidence that not only will unemployment peak, but I hope it won't get to 6.5. It's 6.2 at the moment. It may well not reach 6.5, but I'm being conservative in all my forecasts and as you can see, it is going to come down as the economy starts to surge a bit more.
LAURIE WILSON:
We'll have to make this our final question from Paul Bongiorno.
QUESTION:
Paul Bongiorno, Ten News, Treasurer. I was taken by your opening remarks that in the deep dark days of opposition you gave careful thought to the economic plan you wanted to have but you were always aware of the head winds that could blow you off course. Now, my colleague in the fourth estate at least Piers Ackermann wrote today that last night's Budget was a moderate Labor Budget. Next year's Budget, will this be a return to your economic plan of fiscal - liberal fiscal rectitude and necessary but hard-nosed reform?
TREASURER:
Thanks for that Paul. I have a great deal of respect for Piers, I don't agree with him if that's what he said. I just say to you we have to deal with the environment we have, we have to deal with the head winds that we face, but our plan is carefully thought through, it is working. It's flexible enough to respond to the challenges of the day but most significantly it is showing a very clear path, that is, we are repairing the Budget, we are strengthening the Australian economy, we are spending what we must spend to make Australia safe and secure in the face of terrorist activities, we are focussed on doing what is right to build a new and prosperous economy. And of course, you will have events, look it's inevitable, you're going to have volatility and you're going to have events from time to time, but you cannot let them put you off course. You cannot. And you've got to have a plan that is being implemented and implementable as ours is to an extent it that can deal with those moments and it is, because Australia is getting better, the economy is getting stronger, the Budget is going to be better, there are going to be more jobs, there's going to be more exports, there's going to be greater prosperity, asset values are going up, it is a positive story and now as I've said last night is a time for Australians to have a go, to have a go, as the Prime Minister said, for a fair go, have a go, because this is a great opportunity for Australia to be more prosperous. Thank you.
LAURIE WILSON:
Would you please thank the Treasurer.