FRAN KELLY:
Treasurer, welcome back to RN Breakfast.
JOSH FRYDENBERG:
Nice to be with you, Fran. And just one correction; you said we’re ignoring Labor’s request around the cost to the budget of our tax cuts. That is not true. It is clearly stated in statement three of the budget papers that our tax cuts will cost $158 billion over the decade and it is very clear.
FRAN KELLY:
That’s total. And it’s very clear in the letter that you got from Shadow Treasurer, Jim Chalmers, and from everything else that Anthony Albanese has said since then. But what Labor wants you to provide is how much of that global figure of $158 billion will be going in the third round of those tax cuts to people earning over $180,000 or $200,000 a year. You haven’t given that number yet. I’ve asked you a number of times for it.
JOSH FRYDENBERG:
We have and to be very clear for your listeners, what we are doing is not changing the top rate of tax. What we’re doing is reducing the rate of tax from 32.5 cents to 30 cents in the dollar for Australians who earn between $45,000 and $200,000. That is 70 per cent of tax payers, more than nine million tax payers, and this is focused on low and middle income earners and the progressive nature of our tax system, which we are all committed to, is being maintained with the top taxpayers remaining to be those who are the highest income earners.
FRAN KELLY:
It might be progressive, Treasurer, but that doesn’t really answer the question. Your message back to Labor was read the budget. But the budget papers don’t tell us how much of that stage three spend of $95 billion of over five years will go to the highest income earners. We’ve relied on third parties like the Australia Institute and the Grattan Institute to give us that. The latest estimate is $33 billion will go to people earning more than $180,000 a year. It’s not a hard question. I’m sure as Treasurer, you know this. Is that correct?
JOSH FRYDENBERG:
Well, what we’ve done is entirely consistent with the Labor Party’s approach when they were in Government and made some tax changes. They also provided the cost to the budget and they also provided the details as to who would be affected…
FRAN KELLY:
But Treasurer, I’m sorry to interrupt. I don’t know why it’s a secret. I mean, we’re not in an election campaign now. Why is it a secret to know how much of this tax cut, even if it’s progressive as you say and it just makes up for bracket creep, how much of it is going to the highest income earners?
JOSH FRYDENBERG:
Well, because it’s overwhelming focus is on those who are earning between $45,000 and $200,000…
FRAN KELLY:
I understand, but not in the third trench.
JOSH FRYDENBERG:
Well, that is actually what it is. It’s actually reducing the rate of tax to those people in that tax bracket, Fran. It’s clear that Labor doesn’t want Australians to have the tax cuts that they voted for. Before the election, Jim Chalmers, Chris Bowen and Bill Shorten were talking enthusiastically about the mandate and the moral authority that they would get from an election win to their tax package. Right now, on the other side of the election, an election that we won, where Australians voted for tax cuts as opposed to tax increases, they’re seeking to deny the will of the Australian people and to block what was a key election policy for us.
FRAN KELLY:
But Anthony Albanese says he will pass the first trench and possibly the second one, he will pass the first one in an hour. Why not just give them that so people can get that cheque?
JOSH FRYDENBERG:
Because it was always designed, Fran, to be a tax package with tax relief in the short term and tax reform in the long term. That’s what it was all about. And can I also say to you, here in the United States where the economy is growing strongly and wages are increasing, they have just seen, or back now around two years ago, a major $1.5 trillion tax cut package. And now that is, obviously, playing through with a stronger economy.
FRAN KELLY:
Okay and I will come to your talks with the United States decision makers in a moment. But just before we leave, this Centre Alliance is obviously critical to the Federal Government if Labor won’t come on board getting its tax package through the Senate. Centre Alliance appears to be firmly in opposition to the full package, or certainly, one of its Senators says there is no rush for this. But another, Rebekha Sharkie, who is in the Lower House for Centre Alliance, asks how will we continue to fund the pension and aged care? The most responsible thing the Government could do is break up the three stages.
JOSH FRYDENBERG:
Well, that’s maybe what Rebekha Sharkie is asking for…
FRAN KELLY:
And Labor.
JOSH FRYDENBERG:
And Labor. But, again, they didn’t win the election. We did and we put to the Australian people a comprehensive tax package with both short term relief and long term structural reform. And it is very clear that what our policy focuses on is low and middle income earners, rewarding aspiration, people who have worked hard being able to keep more of what they earn. And the Labor Party seems to have in their DNA a belief in higher taxes and obstructing this important tax relief.
FRAN KELLY:
You’re in Washington, Treasurer. You’ve had meetings with a number of top officials, including the Treasury Secretary, Steve Mnuchin, and also David Malpass, the President of the World Bank. Obviously, global headwinds and what is happening overseas affects us at home and could endanger the predicted surplus. What is the message that you’ve got about the global outlook?
JOSH FRYDENBERG:
Well, and we also recently attended a G20 Finance Ministers meeting and Central Bankers in Japan. And the key message from my counterparts there was the number one threat to the global outlook is the trade tensions between the US and China and we’ve also heard from Reserve Bank Governor, Phil Lowe, similar sentiments. What it’s doing is we’re seeing a decline in trade volumes and also a deferral in investment decisions and this is causing real concern among the global economy. And so what we’re doing is promoting, not only free trade, but also a rules based trading system. Prime Minister Scott Morrison made a speech in London recently about strengthening the WTO and our message is all about ameliorating these trade tensions and supporting free trade.
FRAN KELLY:
Okay, so you mentioned Philip Lowe there, his warning too about the downside risks from the US China trade war, and I’m sure there was a lot of talk about that around the G20 meeting. This could come to a head when Donald Trump and Xi Jinping meet at the G20 later this month. Have you got any sense from the Americans of a back down by Donald Trump or is he determined to go ahead with that $300 billion worth of trade tariffs?
JOSH FRYDENBERG:
Well, as you know, the tariffs that both the US and China have applied cover about 2 per cent of world trade and the public talk has been around increasing those tariffs if there is not a deal to be struck. So, all eyes will turn to Osaka and obviously the discussions there between the Chinese and the Americans. But, I am just hopeful that all parties will, in the end, support free trade, that these tensions will reduce and that Australia will go on creating jobs and opening new markets.
FRAN KELLY:
And what about Australia in all of this? I mean, there is plenty of backdraft for Australia from China and America. But, Australia, for instance, received an exemption from US tariffs on steel and aluminium when Malcolm Turnbull was still Prime Minister. This is when Donald Trump first started throwing around trade tariffs. Since then, Australia’s aluminium exports to the US have soared. That’s troubled some in the Trump Administration, we’ve heard. Did you get an assurance from Steve Mnuchin, for instance, the Treasury Secretary, that Australia’s exemption to the 10 per cent aluminium tariff is not going to be dumped?
JOSH FRYDENBERG:
Well, look, I’m not going to go into private discussions for obvious reasons. But, the Americans know what our position is about free trade. They also know the strength of our bilateral relationship and the historic nature of that relationship. So, our position is well known. And at the same time, where Americans have raised legitimate issues, for example in the China-US context, and we’ve called that out as well. All I can say to you is that we continue to push the case for free trade, acknowledging that one in five Australian jobs are connected to trade and we as a Coalition continue to look for new agreements like we have already done with the Trans Pacific Partnership with Indonesia and others.
FRAN KELLY:
But just briefly and I’m not asking you to give away secret talks, but are you confident that Australia will maintain that exemption? I’m sure out steel and aluminium producers would like to know this.
JOSH FRYDENBERG:
I don’t want to talk about the detail of that other than to say, Fran, that we continue to put our case for why we’re an important trading partner and why our exports are good, not only for the markets in which we sell to but also for our own domestic economy.
FRAN KELLY:
Treasurer, thank you very much for joining us.
JOSH FRYDENBERG:
Always good to be with you.