CHRIS ULHMANN:
Good afternoon and welcome to the National Press Club coming to you from the Great Hall in Parliament House, for our traditional post Budget address and if you want to join our conversation online then our “hashtag” is "NPC" and our Twitter handle is “at PressAUST”. Well, the stage is set, there is much to discuss. I will not delay it. Will you please welcome the Treasurer of Australia, Scott Morrison.
TREASURER:
Well, “hashtag” good afternoon I suppose is the appropriate welcome. Thank you all for being here today. It's great to see so many of you here interested in what we've announced in the Budget last night.
I particularly want to acknowledge my colleagues who are here, numerous and many, but particularly the Deputy Leader of the Liberal Party’s here with us today. Mathias Cormann, the Finance Minister, a partner in this Budget, we've worked so closely on with the Prime Minister. The Small Business Minister Michael McCormack who I can see here and I think I saw Christian Porter as well here, who's been a member of our ERC team. Darren Chester, I’m doing the full roll call now, we'll be here all day. It's wonderful to have my colleagues here today who have been such an important part of pulling this Budget together.
Can I also say, it's great to see Jenny – haven't seen her for a little while. She was down last night. It’s great to have her here today and it's great to have my brother-in-law, Gary, and sister-in-law, Michelle, here today and I want to talk about them a little later in my presentation.
This is a Budget that is about fairness. It’s about security. It's about opportunity. It's a Budget that understands that we need to make the right choices to secure what I believe are better days that are coming for our nation and for our world economically. It understands the new reality that we're working in, in this place. Canberra is a strange place. People watching this program I think understand that. There's a strange gathering of my best friends in the media here as well, joining with politicians. That's not a usual crowd that gets together for lunch on any day of the week out there in Australia.
But here we all are, looking in on what happens inside Canberra on a day like today. But the new reality is it is governing the way budgets are now done. A reality requiring practical budgets, credible budgets, where we must take reasonable and measured approaches to above all get things done. Australians are tired of the politics. They want the politicians they elect to get things done. That’s what matters. Not the ideology and the politics and the personalities and all the things so many people in this place focus on endlessly.
But outside of here they don’t. They want to know what we’re doing here to get things done for them and increasingly that means in this Parliament, wherever we can, meet in the middle to make sure that happens. That means many of us have to move from positions we've been holding previously. We have to. Otherwise, we all just run around this building making excuses as to why nothing has happened and that won't cut it in this new reality of Australian politics.
This is a Budget that recognises that Australians aren’t interested in those political games. They are interested in governments that will focus on getting things done. And as Chris Richardson would know, Budgets have to be credible. The forecasts have to be real and we will debate those amongst the economic circles when all the economists get together. That's a great lunch, that one. And we’ll pore over that. They have to be credible. I want to commend John Fraser and Nigel Ray and the team at Treasury for the excellent work they’ve done in pulling these Treasury forecasts together in this Budget. They're real, they're credible, they are conservative and I think they can be relied upon in terms of the documents which we've presented in this Budget.
In this Budget, we have sought to make the right choices to secure these better days ahead. It's exactly what we've endeavoured to do. It's a fair Budget. It's an honest Budget. And it's a responsible Budget. And there's a lot in it. I think as Australians perhaps, I'm not going to be so vain to think they stayed with us for the full 30 minutes of the speech, let alone the hours of coverage that followed later – that all of us in this building seemed to watch – but there was a lot in it.
There will be time to digest as a nation what we've announced last night and to absorb it and understand it and see that we are identifying problems that Australians feel and understand and we're putting forward solutions practically to those problems. In some cases we're running trials. We've run trials before – Alan Tudge is here – the cashless debit card has been a tremendous tribute to Alan's efforts in this area. When we brought it in, people were saying, “Oh you can't do that, that will never work, communities won't accept it”. Well, guess what? They have. We're expanding it as we should, because we're not a Government that is afraid to try things. If they don't work, guess what? We will stop doing them. If they do work, guess what? We’ll keep doing them and we’ll expand them because that's what practical people do. Practical people who aren't pushed to and fro by ideology and personalities and things of that nature.
So I'm going to focus on a few things today. It was a very comprehensive Budget and I just want to focus on a few items and I'm sure that the media colleagues who are here today will be able pick up the issues they want to raise specifically in questions.
Gary and Michelle Warren are extraordinary Australians. Forgive me as I try to get through this, as Gary will too. They live in Peakhurst Heights in southern Sydney in the same home Gary grew up in. They have four sons. Gary's mum lives upstairs. Her and Roy, who we lost not that long ago, raised their family in this house. Gary's younger sister is my wife, Jenny. The oldest of their boys, we all went to his wedding in January of this year, he studied at Wollongong University and he's now studying at Bible college. We're very proud of him.
There are two other middle brothers. They're both completing apprenticeships. One works for a plumber in the Shire, and the youngest of the four boys is a local independent school and he's a very bright young boy, doing incredibly well. After Gary left school he trained to become a fireman, something he really wanted to do. In my family, my father was a policeman, my brother’s an ambo and my brother in law a fireman, so we pretty much got the services covered. I'm a politician, they don't talk about that. Well, my mum does.
He loved his job. He was passionate about being a fireman. He did it for 20 years. He’s a very physical guy, Gary, I remember going on hikes, canyoning – I wasn't doing that, but he was. Very physical guy. He had a very physical job. It was a very physically demanding job. But in 1999, Gary was diagnosed with progressive MS. The aggressive form of MS and he knew it at the time. The oldest son at that time was just eight years old. The youngest son had not been born. He remained with the fire brigade for another five years and we both thank the NSW Brigade for the tremendous support that they gave to Gary over that period of time. They did everything they could for him. He still does work with them now today and after doing that they changed his duties to ensure that he could continue to work with the fire brigade and share his experiences as a trainer with other young fire brigade officers.
Gary was able to draw down, after he left the fire brigade, on an annuity but he has kept working and sought to work every single day from then until now. Because of his annuity he hasn't had to draw down on a disability support pension. He hasn’t claimed on Newstart. The family is supported by the carers payment and, equally, a mobility payment – as should be the case. Gary has worked at the Triple Zero call centre for the ambulance service. He’s worked for call centres at Fair Trading and court systems in NSW, where he does a great job. He's amazing with people. He can explain anything to anyone – in fact, he should probably be up here explaining this.
When their youngest son went to preschool, Michelle went to the Australian Catholic University and she trained to be a schoolteacher. Five years raising four boys, studying, supporting Gary – that's a big job. It's a tremendous tribute to her of what she's been able to achieve. A few months ago they bought their first home – an incredible achievement. For the last five years or so, as you can see, Gary is now in the chair, before that he had a segway, and at family events everyone loved riding the segway. Gary would show us how it was done. I remember doing it myself one day and it was a pretty poor effort. But for the last five years that's how he's got himself around. And recently when the van was off the road, that he used, Gary had to catch public transport. At the time he was working in Parramatta, that's an hour and a half both ways from where they live on public transport. That's being committed to working. But Gary told me just how helpful his fellow commuters, his fellow Australians were. “People”, he's told me, “are enormously generous, not just happy to help, but keen to help.” And he said, “It's not flash being disabled.” It's not flash. “But if there's anything good about it”, he said, “it's that you're disabled in Australia”. That's an incredibly generous statement about the big heart of Australians. He and I both know that they have big hearts and I don't know a finer man than Gary Warren.
So last night, I was very proud to declare that as a Treasurer in the Turnbull Government, we would fully fund the National Disability Insurance Scheme. That's what this is about. That story.
Guaranteeing this vital service for Australians desperately in need of care and support, and they deserve it. We're asking Australians to chip in for this compassionate cause. Through a half a per cent levy in two years' time, in addition to the Medicare levy – and we strike the levy when the bills come in, not before. That's when the increased bills come in on the NDIS. That’s when the unfunded component of the NDIS starts and that's when we’ll be asking Australians to come to the table and share with all of us to ensure that this program can be delivered.
Australians look after their mates, particularly those who are less fortunate than ourselves. It's our nature. It's our values as a country and that's what fully funding the NDIS is all about.
And it's important that we now end the political debate about how it's funded. We tried to fund it through savings. We respect the fact that the Parliament, and the Senate in particular, rejected those savings. But I'm not saying no to Gary and the other 500,000 Australians who are counting on this, have asked for nothing but we deserve for them to show our support.
So we should end the political games around this. We should gather together and meet in the middle as a Parliament and finish the funding job that was started. Coming together in the middle as a Parliament to maintain support for this important program.
That's what the change is about to the Medicare levy. Reflecting our values, helping our mates, and doing what Australians always do for those in need. And so I call on the Parliament to support us in this important effort as a team, as Australians expect us to do.
Now I want to talk about Simon and Meagan Turner. They're oyster farmers. Rowan Ramsey knows them. Rowan and I came into parliament together almost ten years ago. They farm oysters for domestic and overseas markets at their business, Turner’s Oyster Farm in South Australia. They treat their ten employees like the family blood runs through their veins. That's not surprising, given Turner's aquiculture was started as a family business by Simon's parents. They wanted to take charge of their destiny to better themselves and pass on the opportunity they created with their own bare hands to Simon. Funnily enough, Simon wants to do the same for his own two kids – despite them being too young to object at this point in time.
But before he does that, he wants to grow the business. You know, of course, he can. Because last night, to back him in, we announced a further extension of the instant asset write-off rules for another twelve months. Giving businesses with an annual turnover of up to $10 million – that's five times what it was when we first started this program several years ago – with the chance to instantly deduct the cost of equipment and assets less than $20,000 in value.
It's a policy that Simon is very familiar with. He's used it in the past, to free up cash flow and help his business function more efficiently. The good news for the local boat shop owner down there is Simon's coming your way. He let us know he'll be using the instant asset write-off this year again to buy more outboard motors and oyster grading equipment. A purchase he wouldn't have made without this measure being in place. Courtesy of the small business tax cuts we delivered and legislated in the weeks leading up to the Budget and I announced in last year’s Budget, Turner's Oyster Farm now pays a tax rate of 27.5 per cent and well before his kids take over the business, that rate will be 25 per cent. It's pretty helpful when they freely tell us that their business runs close to the line, like so many small businesses. They're true champions of our economy and they deserve our respect and our support. The Turnbull Government continues to back them in. The Turners are what this Budget is about.
Now there's Joel and Ashleigh Thomson, who are blessed to live in the Shire. A hooray just went up somewhere in southern Sydney for all of those of you. Four days a week, Ashleigh heads out the door to work as a personal assistant and Josh drives trucks for a Sydney metro trucking company. After a day with their grandmother, Ma, their two children go to the childcare centre three days a week, taking up a large chunk of the household budget. A bit less now as a result of the childcare affordable reforms we've passed. It means the Thomson family has had to be pretty diligent to keep a lid on their spending, like the Government needs to. Given that rent gobbles up a fair chunk of their take-home, they're not excessive. They often balk at the idea of going out to dinner as so many Australians know, or to the movies. And they are very pro-active to ensure their power bills are affordable, turning off power points before bed. Despite putting away savings for several years, Josh and Ashleigh think it will take about five or six more years before they have enough money for a home deposit, and that's at current Sydney house prices.
Our critics say we can't help the Thomsons. That the levers to tackle housing affordability are only in the hands of state governments and that this couple is at the mercy of market conditions. But we can't afford to sit on our hands and watch the fond ideals of the great Australian dream slip from the hands of the Thomsons. That's why we're helping first homebuyers, like the Thomsons, by allowing them to use their own salary that they've worked for, to sacrifice it, and to put it into a readymade account that gives them a tax advantage and it means that they will get to their dream of home ownership on their own savings 30 per cent faster. If you could move 30 per cent faster, you'd go there, wouldn’t you? And that's what we've done with our first home Super Saver account in bringing that into being.
But it is not the only thing that we've been doing to address housing affordability to take that pressure off those rising costs of living. We're acting in partnership with state and territory governments to boost supply by ensuring the money we supply to state and territory governments each year, under the previous affordable housing agreement, is a two-way street, not a one-way ATM. And we're expecting states and territories to meet targets to build more homes in every state and territory in this country. And we're expecting them to do it by streamlining their planning systems and dealing with the regulations that frustrate development and supply.
We're working with those state and territory governments to do just that. We're forming a Commonwealth land bank of all Commonwealth land to ensure that developers know the land that’s there and available for them to put more homes. And in Maribyrnong in Melbourne, 6,000 homes will be able to be built on that land. And I'm not just talking about the straight out detached dwellings – I'm talking about affordable housing. I'm talking about social housing, I'm talking about private rental housing, I’m talking about first homeowner housing, I'm talking about housing for people who are changing in life, disabled accommodation – it can do all of those things.
And we're launching the $1 billion national housing infrastructure facility to fix infrastructure bottle-necks at a micro-level working with state and territory and local governments – micro-city deals – to ensure that we can clear the way so those homes can be built. And on affordable housing, we've introduced a package which hasn't been seen for some time. The National Housing Finance and Investment Corporation is offering low cost long-term finance to community housing associations to build more affordable homes.
Foreign investors will be able to invest in affordable housing development and owning affordable housing in this country – and that's where they will get the tax incentive. Not to compete with first homebuyers who are out there in the market trying to buy their first home. We will welcome and channel that foreign investment into building the housing we need which is affordable accommodation, and so much of the housing debate talks about Sydney and Melbourne, but there are people living in Hobart who are paying more than 50 per cent of their income in rent and this addresses their need.
We've also announced $375 million for those who slept rough last night while I was delivering the Budget. The National Partnership Agreement on Homelessness is a fine initiative. It was started by our predecessors in the former Government. We backed it then and I've backed it as a Social Services Minister and now as Treasurer. We've renewed it on several occasions and now I'm making it permanent. Because people who sleep rough, who are feared of being homeless, people who are suffering from domestic violence, people who have are young and are couch surfing – whether it’s in my electorate in Cronulla or across the other side of the country in Western Australia in the town of Bunbury. That funding reaches them and it works with community organisations, not-for-profit organisations who know how to deliver on the ground to fix those problems.
And for those who are downsizing, we're saying downsize and you can invest the proceeds, up to $300,000 back into your superannuation without penalty – non-concessional contribution. Whatever your level, if you've reached the cap, it won't matter, we're allowing you to invest that back in and that ensures that you're in a position to be able to boost your own retirement income as a result and not be penalised because of your downsizing.
And you know, those who say that the Super Saver account is somehow going to undermine people's superannuation savings – that's just a political trick. That's just an ideological opposition to something they didn't think of themselves. This is about people using their own savings. If they're not going to put it in their super account, they’re just going to put it in a bank account and pay more tax on it. They're still paying their mandatory contributions. So don't fall for that one. The reason others have said they’re not going to support this is because they just want to play politics. And that approach is actually going to help young people to ensure they can get in to a house and there will be other opportunities later to go into more detail when it comes to this comprehensive package that we've put together on housing – using the scalpel, not the chainsaw. Making sure that on foreign investors that we put back the cap on what they can borrow, so what they can buy in residential real estate. That cap was actually lifted by the former Labor Government – it was actually lifted by Chris Bowen himself. I'm putting it back on. And on top of that, we're removing the Capital Gains Tax exemption for principal residents for foreign investors and we're tightening up the compliance to make sure they pay their CGT as well. We're tightening up the depreciation arrangements and other deductions for visiting your investment properties as well and you won't get a deduction for that. So we're tightening it up, we’re making it fairer. But at the end of the day you have got to have a scalpel, not a chainsaw, to deal with this otherwise you run the great risk of causing a housing shock which can have ripple effects right through the economy.
Now, when you pore over all the Budget numbers, you see something which you will always see in a Coalition Government Budget and that is we live within our means and we've chartered a fair and responsible path back to Budget balance.
Since our re-election, we were able to get $25 billion in Budget improvement measures implemented, getting things done since the last election. We have also been able, since we were elected, to reduce the rate of growth of debt by two-thirds. We've ensured our rate of growth in spending as a Government has fallen from over 3.5 per cent, in what we inherited, down to less than 2 per cent and that remains over the budget and forward estimates. And what we've ensured is we get back to balance in 2020-21, as has now been included in the Budget papers now for the last two years and the last two midyear statements. For four successive statements we projected the balance would be in 2021 and we've dealt with every challenge that has come our way including the Senate's rejection of $13.5 billion in savings measures that we have now reset in this Budget and we've still ensured that we've got back to Budget and balance and we’ve done it a fair way and we’ve done it a responsible way. And we've also done it as you can see from the chart on the right hand side, if you're facing the stage, which shows that it stays in balance over the median term and we remain below the tax-to-GDP cap of 23.9 per cent, which we apply to ourselves and the dotted line you can see there is what happens when you don't apply such a cap. That's the line that you will find on the trajectory of what Labor says their balance will be. That's the higher tax approach, taxes will always be lower under a Coalition Government.
The other thing we've done, what that shows is that this year's budgeted expenditure as a share of the economy is lower over all the forward estimates than what I said it would be last year. For those of you who say we're not keeping expenditure under control, that's the chart. Expenditure falls to 25 per cent of GDP and it hasn't been there for a while.
We've also been respecting future taxpayers and this is where really I wanted to finish. I owe a lot to Peter Costello – finest Treasurer this country has ever had. I don't think I'm troubling him on that front yet – might take me another ten years but I’ll give it a crack. He was a great Treasurer. He's a great Australian. I admire him immensely as you know. He set up the Future Fund to ensure that unfunded superannuation liabilities would be paid for and that future generations wouldn't be burdened by them.
The decision we've taken in this Budget is to not to draw down on the Future Fund in 2020-21. Now, we could – Peter actually wrote the legislation that said we could – but the cost of that is quite dramatic if we do draw on it. If we hold on for another ten years and don't draw down on that fund, it means that after that period of time, it will reach maturity and go to a point where all of the unfunded superannuation liabilities will be paid for and they will draw down together as you can see on that right hand side chart. On the left hand side chart, it shows that if you raid the fund now, the fund depletes quickly, but the liabilities remain.
This is a century decision. There is a century of taxpayers that will benefit from us holding our discipline and holding our nerve and continuing to build that Future Fund up for another decade. And that is certainly our intention and that is what we want to do and that's why you shouldn't draw down on it. And you can be pretty sure Peter made that argument to you very, very persuasively. And he was right – and Mathias and I agreed with him. And that's what we've chosen to do.
The last point I make on debt is this, while we go back into budget balance on the underlying cash balance in 2020-21, there will be another important date before that. I've talked about how debt is treated in this Budget and I’ve provided greater transparency on how debt has been allocated in this Budget. From 2018-19, just over a year away, we will no longer be borrowing new borrowings to pay for everyday expenditure. That is what living within your means, means. In just over a year by continuing to keep our expenditure under control, to continue to be on a responsible and fair path to Budget balance, it means that you don't borrow and put the cost of today's expenditure on future generations. That's what this government is doing. That's what this Budget delivers.
We've made the right choices to secure the better days ahead. In this Budget, choices to grow the economy, to secure more and better paying jobs. Choices to guarantee the essentials that Australians rely on. Choices to put downward pressure on rising costs of living and the choice to ensure the Government continues to live within its means. These aren’t slogans. I said last night, they once accused me of a slogan called "Stop the Boats". It wasn't a slogan, we turned it into an outcome. These aren’t slogans or statements, it's what we intend to do, it's what we are doing, it's what we are going to get done. These are the pillars that underpin everything we now do as a Government based on the principles of fairness and security and opportunity to keep the government moving forward in its responsibilities, so the nation can move forward. This is what Australians expect of a Government that is in the job to do the job and that's what this Budget does.
Thank you for your attention.
UHLMANN:
Ok, so as we move to questions from our assembled journalists, can I appeal to my colleagues – we have a very long list – could you limit yourselves to one question each? And can I say before I call our first questioner that the Press Club Board was devastated, as were the rest of the media, to hear of the latest mass job losses at Fairfax, so Mark welcome back to work.
QUESTION:
Thank you very much, Chris, and Treasurer, thank you for your address. You've said yesterday and today this is an honest Budget. In it you’ve consigned as you said about $13.5 billion worth of zombie measures to the dust heap. They're no longer in the Budget. Can I ask you, was it therefore wrong for you to pursue those measures for so long given that you have come up with a what, I think, most would people would say is a very moderate and optimistic Budget and a constructive Budget, but without those measures in it and therefore did the Senate and the opposition parties actually save the Government and the nation from those harsh measures?
TREASURER:
We had 25 billion reasons to ensure that we kept pursuing those measures after the last election, because that is the sum of budget improvement measures that we were able to implement after the last election. Those measures were designed to deal with problems and previous Treasurers, every Treasurer, has to deal with the problems that are in front of them. And that's what previous Treasurers, the previous Treasurer Joe Hockey had to do, working with Mathias then as well as Mathias works with me now. And you’re focused on dealing with those problems. We put forward those measures, and we pursued them and the vast majority of them were able to be passed and there remained $14.7 billion, or roughly there in total, and $13.5 billion net that were unable to be pursued. But no one can accuse us of not having tried to pursue them as far as we can and, in fact, when you dealt with the ratings agencies as I did last year, they wanted to see that we were getting progress on those measures and over the back half of last year we demonstrated that and I think that was affirmed when they affirmed our AAA credit rating at the end of last year. They said, they were clearly looking to the next Budget and we tried to get more through and did. And now we’ve made the decision to reset, and I think that underlines the credibility of the Budget. But at the same time being able to hold on to the 2021, in fact improve on the 2021 projected surplus and ensure we maintain that very cautious and I think conservative approach on our forecasts underscores I think the financial wisdom of the decisions we've taken in this Budget. So 25 billion reasons that future taxpayers and current will thank us for that we continue to pursue those savings.
UHLMANN:
The Guardian.
QUESTION:
Hello, Treasurer. Katharine Murphy from The Guardian. Given you seem to be meeting the most political resistance today in funding the NDIS, because of your decision to share the costs of that down the income scale. So could I ask, why the Government didn't impose the costs of funding the NDIS on high income earners? Why have you spread it down the income scale?
TREASURER:
Well, we do, Kath. I mean, if you earn more money you're paying a higher levy. If you earn less you pay a lower levy. And for lower income earners, particularly low income earners, they don't pay the Medicare levy at all, and if you have more children there's a higher cut in rate on income for those families. This is an insurance levy. We're all affected by it. I've shared with you my personal story on this today from my family. I could go to every table I suspect and get a similar story or an associated story. This is all of our responsibility. All of us, but for the grace of God, could find ourselves in that situation, and we'd be expecting and hoping that our mates would be looking after us. So we're all mates as Australians and we all have a responsibility in this area. I don't agree that people have reacted in the way that you said. When it was first introduced, Australians accepted it and I see no reason why the Parliament can't come together again and do that again. This isn't about ideology. This isn't about setting people against each other. This is about all of us accepting that we've got a responsibility and I think Australians are big, they're big enough to understand what this is about. It comes in when the bills come in. And you know in the future, a Coalition Government would love to reduce personal income taxes. We did it last year. I'd love to do it again, if we're in a position to do that. And if we do that, the NDIS is still secure. Whatever happens with the tax rates in the future, the NDIS is guaranteed. And that's what we're doing and that's why it should be supported. And I believe Australians will support it, because they’ve got big hearts and they look after their mates.
UHLMANN:
The Australian.
QUESTION:
Thanks, Chris. G’day, Treasurer. David Crowe from The Australian. Thanks for your speech, thanks for telling us Gary's story as well. Further to Katharine's question, there has been some discussion this morning about the tapering of the Medicare levy and the Medicare levy increase because of course somebody up to 21,000 doesn't pay it at all, but then it ramps up to around 50. Now, you want to get it legislated, I presume you want to get it legislated fast. Are you open to adjusting the way it tapers in order to get something through the Senate?
TREASURER:
Well, the Medicare levy is well understood and there are exemptions to the Medicare levy. For example, service people have special concessions under the Medicare levy. I don't think people would disagree with that. Blind pensioners have exemptions under the Medicare levy. We haven’t tampered with the way that the Medicare levy operates. We've simply applied the increase to how it's currently structured. Now, if there are other debates about the whole Medicare levy, how that should all be structured, that's a different discussion. That’s a completely different discussion. We can simply put a further 0.5 per cent on in two years and we can fully fund this thing. And we can end the political debates that are occurring about its funding and then we can now then work together on delivering it across the country, and explaining to Australians what they're paying for. Australians still have concerns about the NDIS, don’t get me wrong. They don't trust too many governments with these things ever, and they want to make sure that their money is well spent, and people with disabilities get the support. People with disabilities have serious questions about how this is going to work. I want to be spending our Government's time solving those problems. Not fighting with the Labor Party and other people about how it should be funded. I'm over that discussion. So are disabled Australians and I think so are most Australians. So let's end it. Let's end it. Let's back this and move on to the next job.
UHLMANN:
The Australian Financial Review.
QUESTION:
Laura Tingle from the Financial Review Treasurer. I just want to touch on a couple of things you’ve said. One of them was a very lovely graph you had about the underlying cash balance projected, which goes nice and flat.
TREASURER:
Thought you'd like that one.
QUESTION:
It’s a nice one, yep. You notice that in the Budget papers it says that tax, it's based on tax receipts being assumed to remain constant as a share of GDP, which is adopted for technical purposes.
TREASURER:
Correct.
QUESTION:
Effectively reflecting your cap of 23.9 per cent of revenue.
TREASURER:
Correct.
QUESTION:
Now some people have been questioning your wages forecast, but let's presume that they're right. The bottom line is, what happens to bracket creep? Doesn't all of this suggest that there is the room next year for you to give tax cuts to address bracket creep? And can you just give us a clear statement on what your position is on bracket creep before the next election?
TREASURER:
Well, I demonstrated my position on bracket creep last year, when we ensured that 500,000 Australians who would be on a full-time ordinary wage wouldn't go into the second highest tax bracket. That's what I think about bracket creep. That wherever I can do something about it, I’ll do something about it. And you're right to say that the medium term projection of our surplus position, we constrain by ensuring that taxes remain less than 23.9 per cent of GDP. That's what we do. And what that assumes is, on the graph you would have seen the difference between the dotted line and the straight line. And, what the technical assumption is, is that Governments will take decisions when that tax cap is at threat of being breached to ensure that taxes remain below that level. Now, we're committed to taking that approach. I noticed in the last election the Labor Party didn't commit to that. But we certainly intend to follow that practice.
UHLMANN:
And do something before the next election?
TREASURER:
Well, it's a function of the numbers Chris. That shows that we remain under the tax to GDP cap for the full four years of the forward estimates.
UHLMANN:
News.com.au.
QUESTION: Malcolm Farr from news.com.au Treasurer. Thanks for your address and for the well-deserved salute you gave your family.
TREASURER:
Thank you.
QUESTION:
You’ve held open the prospects to the banks of a $7 billion tax cut somewhere down the line. But, last night you then increased taxes on the banks by $6 billion. Isn't this a concession by you that not all big corporations use their profits to fund growth and jobs?
TREASURER:
The bank levy, major bank levy, which as you know applies to four big banks and those banks over $100 billion in liabilities, which just means the extra one which is Macquarie, which is at a much lower level of liabilities but still above 100. It doesn't apply to the regional banks or the small banks. It's not levied on deposits. It not a reintroduction of a financial institutions duty, that's not true. That was on deposits by states. It's not on mortgages, it’s not on shareholder capital, it's not on tier one capital, which is required to be held by the banks to ensure they're unquestionably strong. All of those things are carved out. And it’s very similar to what’s done in many other jurisdictions around the world, the Netherlands and others, very consistent with that. And in the UK they have a similar method of doing this, but they do it a different way. They drop the corporate tax rate, but then have a higher corporate tax rate for the banks. Now, I think this is a better way of doing that. So we're looking to lower the overall rate of tax for all businesses to ensure that drives investment as part of our Enterprise Tax Plan for more and better paid jobs from the growth it supports, but in this specific case, consistent with international practice in many jurisdictions, we are applying this additional levy. Now, in a perfect world, I'm never one who likes putting up taxes on things, but in the era of the achievable, in Australian politics, you've got to look at things sometimes that aren’t always your first preference. Now, I could have said no, we’ll let the debt extend and the deficit extend more years. We could have put the AAA credit rating at risk for that great purpose, which I don't think people would have welcomed and rightly, or we could have made this decision. The Parliament made its decision not to accept the additional savings. We can't whine and whinge about that and play political games about it. Let’s be honest about it. Rule a line. Move on, apply a solution, this isn't about me and the banks or anything like that, acknowledge our sponsors today. Your sponsors. It's not about that. I mean, we've got to stop looking at these issues as conflicts and I appeal to the media in that respect. Not everything is about conflict guys. Not everything is about personalities. And for people who aren’t in this room today, they're sick of that nonsense. They just want a government that is focusing on making the right decisions. And they want the information about the decisions they're making and how they impact on their lives. Enough of the gossip.
UHLMANN:
Sky News.
QUESTION: David Speers from Sky News Treasurer. Further to that, I appreciate your message there about conflict, but leave the media to one side, can I ask you about the banks’ reaction to this. As I understand it bank CEOs are writing to their 140,000 staff today to explain what this is going to mean for them. One of the letters I’ve seen from Ian Narev to Commonwealth Bank staff, he warns that Australian banks are going to be amongst the most highly taxed in the world, he warns it will impact on economic growth, on the strength of the banks. He warns this could hit customers and shareholders and says there is no such thing as a cost being absorbed. You have described this in some of your interviews as a levy for Budget repair. Can I just ask, once the Budget is repaired, we're back in surplus, does it go?
TREASURER:
Well as you can see over the next ten years we need to maintain the Budget in balance and it's not shooting up high on that balance over the next ten years. Now, I don't find Ian's comments surprising. $1.5 billion is raised and there's an annual profit of those banks combined of more than $30 billion. Give me a break. That's what Australians will be saying. And with great respect to the banks that are in the room, families absorb costs, small businesses absorb costs. And, you know, this is where I think a company has its value. A company has its value in the way it treats its customers. The services it provides and how it looks after them. The banks want to send a message to their customers about how much they value them? Don't do what they may be contemplating doing. Don't do it. They already don't like you very much. They don't like us as politicians universally that much either. So we understand your pain. But prove them wrong on this occasion. Prove them wrong. Don't confirm their worst impressions. Tell them another story. Tell them you’ll pony up and you’ll help fix the Budget.
UHLMANN:
So just briefly on that, two things. They should absorb this and this is a permanent increase in taxation for them?
TREASURER:
Correct. I’ll have to find out whether he wrote to his employees and told them that we’re cutting the company tax rate to 25 per cent as well. I’ll follow him up with that.
UHLMANN:
Australian Associated Press.
QUESTION:
Treasurer, Colin Brimston AAP. Thank you for the speech, and I think people out there don't like us either, but there you go. While we were in the lock-up yesterday, share prices on banks fell sharply. In fact billions was wiped off on the speculation that you were going to introduce this surprise tax cut, sorry, tax levy on the banks. Given the price sensitivity of this issue, didn't that leak make a mockery of the Budget lock-up? And will you be investigating where that came from?
TREASURER:
Jon Faine raised this with me this morning. Now I haven't seen any evidence prior to walking in here today and certainly when I was doing that interview with Jon this morning, I mean, you guys have been in Budget speculation fever about four months. I mean there isn't one item in this Budget you haven't speculated on. I've worked it out now, how it works with the media. You work out every potential scenario that could possibly happen in the Budget, you write it in the paper and at the end of the day, you know, you predicted the dawn. Well done. Sun comes up tomorrow. I said it would. Media speculation goes crazy before the Budget. I get it, that's fine. And there's been lots of speculation. And if there are serious issues here that need to be addressed, and of course the secretary and I will be addressing them appropriately. But that will be on the basis of evidence. Now, in terms of market volatility, well we've seen that in relation to many things and markets are volatile and they will move about and we will see how this pans out. But I noticed that Goldman Sachs, the banks will be pleased to know, are still recommending, buy.
UHLMANN:
The Conversation.
QUESTION:
Michelle Grattan from The Conversation. Mr Morrison can I ask you about the Liberals’ view of the role of Government?
TREASURER:
The what sorry Michelle? I missed that.
QUESTION:
The Liberals’ view of the role of Government? Just over a decade ago, John Howard wanted to privatise the Federal Government's 13 per cent of Snowy Hydro. In this Budget you're interested in trying to buy the whole kaboodle. Could you take us through how the Liberals have moved from that position to the current position?
TREASURER:
Well look I'm not here to give ideological homilies. I'm here to deliver a Budget that deals with the practical needs of Australians. But you would know, I mean John Howard was a very pragmatic Prime Minister and a fine Prime Minister. A very fine Prime Minister. Like his Treasurer was a fine Treasurer. They dealt with the things that were in front of them and as you recall they decided not to do that. They listened and they decided not to do that. What this discussion commenced with NSW and Victoria will do, if we can arrive at a conclusion, is it will free up capital that those states have tied up in that company. And they will be able to put that capital into infrastructure works in their states. Seems like a smart idea if we can make that happen. Freeing up that capital, and ensuring that more roads, more bridges, more rail, all of these things can be supported in their states. At the same time the Commonwealth and the Prime Minister as you know, a frustrated engineer as we all know in the Cabinet he is, no-one knows more about pumped hydro in this place, I suspect, than the Prime Minister. I was in Queenstown a little while ago for the meetings with the New Zealanders, and Arthur and I were travelling to a meeting and we were looking around all these mountains and hills and I said, I bet you the Prime Minister is seeing pumped hydro stations all the way around these hills. But we have got big plans, quite seriously, for Snowy 2.0. This is the gold standard of nation building infrastructure and its day is coming around again because of the wisdom of that method of energy storage and how it can make a big impact. A big impact on energy affordability in this country in boosting the storage capacity, which has been one of the big missing the links. So we want to do more with Snowy 2.0. We want to free up the states if with can agree on the right terms to build more and do more in their states on infrastructure and the link between John Howard and Malcolm Turnbull is, they both are Prime Ministers focused on getting things done.
UHLMANN:
But surely a Liberal Prime Minister would encourage both NSW and Victoria to sell Snowy Hydro?
TREASURER:
It will stay in public hands.
UHLMANN:
Network Seven.
QUESTION:
Treasurer, Tim Lester from the 7 Network. I think in all four of the Coalition's federal Budgets now, foreign aid has either been cut or frozen for a couple of years I think this year? I think our foreign aid is now less than, as a proportion of national income, less than half Great Britain's. At what point as Treasurer in the future do you think you will say enough, foreign aid has to have some Budget priority?
TREASURER:
Well it still remains a very significant priority for the Government and we still invest considerably, particularly in supporting our near neighbours. Not just because that's the right thing to do for our neighbours, particularly in Papua New Guinea and through the Pacific. Our foreign aid budget is actually growing as the Foreign Minister reminds me, of course it is. But we're spending it even better, Tim. We're spending it much better than we used to. We're partnering better with organisations around the world and I've seen it. I have had an interest in this issue going back to my first speech in the Parliament, my maiden speech in the Parliament. When I have the opportunity and have over the last decade to be in different parts of the world, I spent a fair bit of time in Papua New Guinea and Sri Lanka, I remember Julie and I were there together. I won't tell that story, Julie.
UHLMANN:
Please do.
TREASURER:
But, we visited an amazing homes project, I remember, with Sri Lankan families out near Molitivu in Sri Lanka, which was being supported by our aid work. So our people do great jobs, but you know, it's got to be all within our means. Australians expect us to continue to be able to deliver the services here at home. That is our top priority. But we are a compassionate nation, and I look forward to the day where we can be more generous. We're a prosperous country, we’re a strong country, and we’re a generous country, and we will stick to those values.
UHLMANN:
Network Ten.
QUESTION:
Paul Bongiorno, Treasurer. Today no less a personage than Alan Jones gave the Prime Minister the rounds of the kitchen table on the credibility of the Budget's forecast. He came up with compelling evidence that the forecast struggled to last six months, let alone to the next Budget, or even the end of the four year forward estimates. Are you inclined to follow the fashion of the United States and indeed the United Kingdom and have an independent agency like the Parliamentary Budget Office do the forecasts independent of the Treasurer and the Finance Minister of the day?
TREASURER:
Thanks Paul. I have great confidence in the Treasury and their ability and their work that they do in this area. I think over the last two years in particular, I've been very comfortable working with the Treasury in what they've called on these issues. When you go back to December of last year, we together, the Treasury took the decision to make the call on how we would forecast on commodity prices. Now, were they departed from the previous practice? They knew they weren’t going stay at that level. And guess what? Pretty right. Not many people get that one right. We did. And the forecasts we have in this Budget, whether it's on wages or indeed on growth, particularly for the current year, we've actually taken them down since the midyear statement. We haven't put them up, we’ve put them down. And on top of that our forecasts for our growth and for global growth are actually less than what the IMF is saying. And our forecasts sit very much in the middle of the pack when it comes to consensus forecasts in this country. So there's some evidence that I think backing the judgements that the Treasury have made. They're a professional organisation. As a Treasurer I have the privilege to see just how professional they are and I have great confidence in their Secretary and the entire team to keep doing that job well for Australia, as they've done for a very long time.
UHLMANN:
But why would wages which have been so flat grow so remarkably in the next three?
TREASURER:
Well we actually took down the wage growth forecasts from what we had in December and they remain, as I said, in line with consensus forecasts in the country today.
UHLMANN:
But your expectation is they’re going to grow?
TREASURER:
Yes, because we're investing in a growing economy and the global economy is improving and that's improving, and that’s consistent with what we're seeing both here and overseas.
UHLMANN:
Radio 2CC.
QUESTION:
Treasurer, Tim Shaw from Radio 2CC Canberra, thank you for your presentation. Canberra's tradies say g'day. Most of Australia’s small business does too, they appreciate the tax cut at 27.5 per cent, the instant asset write-off, they can buy a new ute. But, they've never heard of The Moodys.
TREASURER:
They’ve never heard, sorry?
QUESTION:
The Moodys. They don't understand the ratings system. What they're worried about is their overdraft. Now you put this tax on the four big banks, what can you tell Australian small business about what they can expect in terms of their business overdraft and their profitability? They're already counting their chickens on the tax cut. But what about their overdraft and the interest rate?
TREASURER:
Thanks. Look I've already gone through the key tax measures in the Budget for small business, so I won't go over those again. And as you know, they tell me and they tell Michael all around the country that they appreciate that support. And I've already, I think, touched on what my message to the banks is in terms of their business customers. You know what? I'm sure there are smaller and regional banks and other banks who’d be happy to take their business if they're not happy with the overdraft rate they are getting from the larger banks. That's about competition. Again, it's not about me and the banks, it's just about competition in the market, and there should be more of it. We want to encourage that. And we've announced the Productivity Commission inquiry into that issue as well and we've got a standing ACCC commission there, with a team which is full-time, a permanent standing policing of competition in the banking sector. That's what we've announced in this Budget. The other thing we're doing for them in this Budget, is we've put aside $300 million for cutting red tape for small business and we've cut a lot of red tape as a Commonwealth Government. But I know that a lot of small business and Michael knows this, they don't tend to feel it. We've done it, but they really haven't felt it. And their feedback to Michael and through to us was we really need to cut that red tape at the state and territory level and the local level. And that's been the feedback from my businesses in my electorate in the Shire. And so we're incentivising, rewarding those state governments and I've had a good chat to Dom Perrottet, my colleague in NSW. He might barrack for the Tigers, but he's still a good bloke. And Dom is chomping at the bit as I know Gladys Berejiklian will be, to be cutting that red tape for small business in NSW and I hope all the other states can chase them and catch them up.
UHLMANN:
West Australian.
QUESTION:
Andrew Tillet from The West Australian, Treasurer, thanks very much. I want to ask you about the reduction in the threshold for university student loan repayments down to $42,000. There are people who are working, earning that sort of money, who are getting a little bit of welfare in the form of rent assistance, which has a very savage taper rate as your income rises up. With people like that, and also too, they will be hit by the changes to the Medicare levy. With that, do those changes have the impact of some people being left with a situation where they’re going to be facing almost a 100 per cent effective marginal tax rate? Every extra dollar they earn basically will just go straight to you. I wonder how you can say that's fair for people who would be rightly considered working poor?
TREASURER:
Well, I any you've made a lot of cumulative assumptions in the question. But let me deal with the component parts of it. 25 per cent of student debt is not repaid. That's not very fair to taxpayers. And what we've done is we've ensured that the pay-back threshold for paying back that student loan starts earlier, and so those debts can be paid down. Taxpayers will continue to pay well over half of every higher education student's education costs in this country. Over half. So that means tradies, personal assistants, if they haven't been to university, others who are working out there, paying their taxes, to ensure that people are having more than half of their education costs paid for. Now that's a good investment by the taxpayer in higher education, but the debt, which is extended to them on concessional terms has to be repaid. Opportunities are created through that higher education extension which has been provided to them. And it's only fair, it's only fair that we ensure that debt is paid back. Now, I've already talked about why I think it's fair to address the full funding of the NDIS and you would know that there are cut-in rates for the Medicare levy which means that people on low incomes wouldn't be impacted by the existing Medicare levy, let alone any change to it. And so I refer you to those things. But, you know, the other thing we did in higher education is we want a better deal both for the students and for the taxpayers. And that's why we propose the 2.5 per cent efficiency dividend for the next two years on those tertiary institutions, which again, I think that's a fair thing to do to try and ensure that we all pay less.
UHLMANN:
Last question’s from the Adelaide Advertiser.
QUESTION:
Treasurer, Tori Shepherd from the ‘Tiser. Would you prefer to have had option A, as in the $13 billion zombie measures, go through to actually raising the Medicare levy?
TREASURER:
It's now moot. And you know what, if you're practical, you don't dwell on things like that. You deal with the situation that you have. That's the situation we've got, we've reset the Budget on those measures, we’ve got the Budget coming back into balance. Still on the same trajectory, still on the same track, indeed even better. We're not borrowing to pay for everyday expenditure in just over a year from now. We are ensuring that we’re investing in the growth for our infrastructure, our tax plan. The defence industry plan of which South Australia is a huge beneficiary of, as well as other states through the defence supply chain. The North-South Corridor, all those things, the infrastructure we're putting into South Australia. The linkages that we're proving up for the gas pipelines into South Australia, from Western Australia, and from the Northern Territory. The $35-odd million that we've forwarded to South Australia for their own energy infrastructure investments they wanted to do. All of this is growing the economy in South Australia. The $100 million which you wrote about earlier this week for the Manufacturing Transition Programme that we've put in there, which Arthur announced the other day. I mean, all of this is to support growth for more and better paid jobs. The Budget is putting a clear guarantee there for Australians to see on the services that they rely on. The Budget is definitely putting downward pressure, whether it’s on electricity prices, housing prices, and let's not forget the pensioners, 90,000 of them, former pensioners who will get their pensioner concession card back and a one-off payment between now and 30 June to put downward pressure on those rising costs of living. Not to mention what Greg Hunt has been able to achieve so well with Pharmaceutical Benefit Schemes in ensuring the extension of those medicines, particularly to older Australians. And above all, we live within our means based on the principles of fairness, of security, and opportunity. Thank you.
UHLMANN:
Thank you, Treasurer.