NEIL MITCHELL:
On the line is the Federal Treasurer, Josh Frydenberg, good morning.
JOSH FRYDENBERG:
Good morning, Neil.
NEIL MITCHELL:
Okay. Let’s address things. Will you fix the tax system out of this?
JOSH FRYDENBERG:
We have already undertaken very significant tax reform. In the last two Budgets, Neil, we’ve passed $300 billion…
NEIL MITCHELL:
The head of the Reserve Bank says that’s not enough. He says we need more. Will you do more?
JOSH FRYDENBERG:
Well firstly, we have been doing a lot and we will continue to undertake tax reform. But your listeners do need to understand that once our legislated tax reforms are fully rolled out, 94 per cent of tax payers will pay a marginal rate of tax no more than 30 cents in the dollar. So if you’re earning between $45,000 and $200,000…
NEIL MITCHELL:
But that’s not reform, that’s not reform. That’s a change, I agree, and it’s a welcome change. But genuine reform, we’ve got to reduce the tax rates right through. We’ve got to address the GST, surely. We’ve got to look at taxes on business. We’ve got to look at regulation too.
JOSH FRYDENBERG:
I think a flattening and simplifying of the tax system and ensuring that 94 per cent of tax payers pay a marginal rate of no more than 30 cents in the dollar, that’s a huge change…
NEIL MITCHELL:
Is it indexed?
JOSH FRYDENBERG:
It does change. It is indexed. But the key point here in relation to company tax that you raise is that we do have an un-competitively high company tax rate. So at 30 cents in the dollar for larger companies, that compares to 21 cents in the dollar in the United States, 19 cents in the dollar in the United Kingdom and 17 cents in the dollar in Singapore. We have been successful in reducing the company taxes for small and medium sized businesses but we tried and we were unsuccessful in doing it for large businesses and we continue to maintain an open mind on those things.
NEIL MITCHELL:
Okay. So, will company tax be back on the agenda once we get through this?
JOSH FRYDENBERG:
Well it’s an issue that we are continuing to look at. We haven’t made any commitments. But obviously that was a debate that was had in the Parliament and that was lost. But again, what the Reserve Bank Governor has reminded us all of is the importance of the productivity enhancing reforms, not just tax but industrial relations, infrastructure pricing in relation to deregulation, and of course, the skills and education agenda.
NEIL MITCHELL:
Well that’s my point. You say with tax, well maybe you look at business tax. What do we do on industrial relations? How are you going to sort that out?
JOSH FRYDENBERG:
We’ve got a Bill before the Parliament to reduce the lawlessness in the construction sector and, as you know, that can add up to 30 per cent to the price of major building activity. So we would hope to get that legislation through the Parliament and that will be an important step forward.
NEIL MITCHELL:
Well that sounds pretty much as business as you were, though. I mean you’re saying we’re doing these things, we’ll stay at it. Will you use this opportunity to seek radical, dramatic reform in the tax system, in the industrial relations system?
JOSH FRYDENBERG:
I’m not about to announce it on your program this morning…
NEIL MITCHELL:
No, I don’t want detail. I just want a philosophy. Do you want dramatic change in those areas?
JOSH FRYDENBERG:
I want lower taxes all the time and that’s why we have announced the company tax changes, that’s why we announced the income tax changes, that’s why we announced in our first tranche of measures in response to the coronavirus a 50 per cent accelerated depreciation allowance which will go into next year. The other thing I want to point out to your listeners is that we’re in the middle of a global pandemic. We’re not out of it by any stretch of the imagination and we’ve been successful in flattening that curve, and taking the number of new cases per day, Neil, from above 20 per cent to below 1 per cent. That’s been important and that was one of the reasons why the Prime Minister was able to stand up yesterday and announce a gradual easing of the restrictions starting with elective surgery.
NEIL MITCHELL:
But you’ve got the Government out there today talking about fast-tracking the building of roads. Fair enough. So you are looking ahead. What I’m trying to nail down here is how broadly you will look ahead. Do you look at tax? Do you look at regulation? Do you look at the GST? Do you look at the IR system? What’s the answer?
JOSH FRYDENBERG:
Well we do look at the tax system, the IR system, the infrastructure roll out, as well as deregulation. They are all going to be important…
NEIL MITCHELL:
What about GST?
JOSH FRYDENBERG:
We’ve said we’ve got no plans to change the GST and that remains our position.
NEIL MITCHELL:
But under a radical review, that’d have to be on the table, wouldn’t it?
JOSH FRYDENBERG:
Well you would like it to be, we don’t have plans to do so and we’ve been consistent in that. But we do, obviously, have a major reform agenda and we’ll continue to reassess it in the context of what is the current situation.
NEIL MITCHELL:
And it’s not business as usual, you said, did you?
JOSH FRYDENBERG:
It’s not business as usual, of course not. Just yesterday, I have to say to you, I was on video conference calls with the 20 leading CEO’s across the country with the Business Council of Australia, with the state and national representatives of the Australian Chamber of Commerce and Industry, as well as the Australian Industry Group. And in all those discussions, what was clear is that they appreciated the Government’s support and they stand ready to work with us in the road to recovery.
NEIL MITCHELL:
I know you need to get away so a couple of quick things. Virgin, do you think the State Government’s should stay out of it?
JOSH FRYDENBERG:
Those are matters for State Governments and I’ve noticed that Queensland and New South Wales and even Victoria have had things to say. What we want to see is a second commercially viable airline operate on the major domestic routes. Voluntary administration is not liquidation, it’s not Ansett, it’s not the end of the airline. But it is a well-established path to the recovery phase which Virgin actually said in its statement, similar sentiment, yesterday, and there are a lot of businesses that are interested.
NEIL MITCHELL:
Did you ever consider a bailout or was it just ruled out immediately?
JOSH FRYDENBERG:
Well they’ve got five major foreign shareholders Neil, who between them own 90 per cent of the airline, including Etihad and Singapore Airlines, Virgin International and two major Chinese companies. We weren’t going to bailout those large foreign shareholders who did indeed dig into their deep pockets. So we made a decision on that. The voluntary administration process will continue, we’ve appointed Nicholas Moore, the former head of Macquarie Bank, to engage with the administrator from here.
NEIL MITCHELL:
Sorry I know we’re about to lose you, I really wanted to get to this point. You’ll have to approve any ownership of Virgin. Do you want it Australian owned, do you want to avoid international ownership?
JOSH FRYDENBERG:
Well again, I don’t comment on individual foreign investment proposals. But as you know, we have reduced the threshold to zero during this global pandemic for the assessment of foreign investment proposals and that’s because we don’t want any predators to come in and look at distressed assets in this time.
NEIL MITCHELL:
Could we end up with China, or the Chinese Government or Chinese businesses, owning Virgin?
JOSH FRYDENBERG:
I’m not going to speculate on that. It’s my job to assess, in the national interest, the merits of each application, and that’s what I’ll do.
NEIL MITCHELL:
And quickly, a response to the Chinese Embassy saying Peter Dutton’s effectively an agent of the Americans. What do you think?
JOSH FRYDENBERG:
Unwanted, unjustified and we’ll continue our good economic relationship with China. Many Australian jobs depend on that. But I think those comments did not reflect the facts.
NEIL MITCHELL:
Depression, it’s going to hurt Australians isn’t it, what’s coming.
JOSH FRYDENBERG:
Well there’s no doubt the fallen economic activity is going to see Australians out of a job, or working less than they otherwise would, that’s why the Government’s announced a record $320 billion worth of economic support.
NEIL MITCHELL:
And house prices? House prices down.
JOSH FRYDENBERG:
Well house prices are a function of a couple of things. In terms of lower interest rates, and we’re going to see them for longer. But also unemployment, and there’s no doubt there’s going to be a tick up in that with Treasury estimating unemployment to rise to up to 10 per cent. So we’ll wait and see what happens with housing prices but there’s obviously been less activity as the social distancing laws have been put in place and auctions have been called off.
NEIL MITCHELL:
Okay, I really appreciate your time thank you very much.
JOSH FRYDENBERG:
Always good to be with you.