DAVID SPEERS:
Treasurer, thank you very much for your time, I just want to start on this tax debate ahead of the Budget. You did warn a month ago that leaving bracket creep unchecked would be a drag on growth, in fact Treasury modelling was released showing the GDP would be .35 of a per cent lower. You said that we have to find a way to mitigate that now. Is that still your view?
TREASURER:
Well, we need to mitigate a way to deal with growth and we are in a transitioning economy. We are successful in managing that transition, I believe. We have real GDP growth at 3 per cent last year, 300,000 jobs, confidence is up over ten per cent, consumer confidence that is and on the economic outlook over 25 per cent on six months ago. So, that transition is going well. You have got to keep focusing on growth. When we were discussing, particularly issues around income tax that was in the context largely of a big tax mix switch around the GST but the issue has always been about growth, David, and that is why the Budget will be very much focussing on growth and what is needed to drive growth so we can successfully manage this transition going forward – you can't take it for granted.
SPEERS:
Sure, but my point here and your point last month was that without tackling bracket creep, without some income tax cuts we are going to have a drag on growth. Is that so?
TREASURER:
Well, you have got to do things that drive growth that is my point. There are many things that can hold the country back and we need to address as many of those as we can. The important thing is at this stage of the transition of our economy is that we focus on the things that are going to drive investment. That is the thing that is going to most drive growth going forward and that is what is going to drive jobs. So, as we prepare for the Budget the Government doesn't have unlimited option, we have very constrained options in this fiscal environment and particularly if you are not going down the path that we looked at, for good reason, after we did the analysis around the tax mix switch then you need to focus on those areas of your tax system that are most going to drive economic growth. That is what peoples' jobs will depend on going forward.
SPEERS:
Let me ask you about that analysis on the tax mix switch – did Treasury look at putting up the GST and using some proceeds to cut company tax?
TREASURER:
Well, between Treasury and others I think there is a lot of analysis out there on the impact of those changes on growth and they have always reported a positive outcome. Those changes are very much linked to investment. I think they are fairly established principles. When you look across the whole tax system what you need to do is you need to ensure that the resources that you have available… because we are not about trying to raise taxes to chase higher levels of spending, and we are in a position because of revenues from other areas and being able to ensure that we direct those wherever we can to lowering taxes. We are a Government that understands that lower taxes are better for growth. You don't have unlimited options and I think people understand that. Householders, businesses, others, they don't have unlimited options and they know they have to make choices and they understand the Government also has to make choices and that is what we are doing in the lead up to this Budget but what they should know is that we are focussed on growth and growth first.
SPEERS:
Sure, but you have the option of increasing the GST and using some of that to cut company tax but the modelling that you released was all based on using a higher GST to fund personal income tax cuts. Was modelling done on cutting company tax and what did it show?
TREASURER:
Well, our understanding of the impacts of company tax I think are well known, they are out there. The impact of changing company tax is well known to have a positive impact on growth but when it comes to GST and a tax mix switch that was all about dealing with the household sector and if you are asking households to pay more in GST than the purpose is to return that to them in lower income taxes. When you take into account the impact of compensation and those other issues any growth impact was completely overwhelmed. We formed the view after proper consideration not to proceed with that proposal at this time and we would never consider going forward with a proposal like that unless we put it to the Australian people. So, it was timely to resolve that matter. We did resolve that matter and now we have moved on and we are looking at the Budget and looking at the areas where we can most drive the investment, David. This is the key. The Budget needs to drive investment because that is what will drive growth which is what will drive jobs in this transitioning economy. Higher spending, backed by higher taxes is not a plan for jobs and growth and it is not a plan for investment particularly as our opponents want to put up capital gains tax by 50 per cent on investment.
SPEERS:
Do you accept, Treasurer, that some people are going to need a bit of convincing that a company tax cut will be good for them? That it is going to trickle down to the workers? Particularly when the tax office today puts out a list of 98 privately owned Australian companies worth more than $200 million. Some have associated entities that pay tax but still 98 of them pay no net tax themselves. Why do they deserve a tax cut? Can you understand people need some convincing on this?
TREASURER:
Well, David the tax changes that we propose to make to the extent that they are made will be announced in the Budget. I have made no announcements along those lines and that detail will be contained in the Budget. But remember this, corporate taxes, company taxes, taxes paid by small businesses through to large businesses and then when you throw in the payroll taxes they pay at a state level that totals almost $90 billion a year. Then you have got all of the employees who work in these companies that those companies' investments which create those jobs and the income taxes that come from those jobs – that is where the government revenue comes from. Companies employ people, companies create jobs, companies make investments and if you want to drive investment which is critical at this stage of our transitioning economy which is going well but investment particularly in the non-mining sector is the next phase of that. You need to have a tax system which is going to support investment to drive that growth and jobs in this next phase.
SPEERS:
Let me turn to the recall of Parliament in a few weeks' time. The Prime Minister's letter to the Governor-General yesterday requesting that the Parliament be brought back early refers to, and this is about making a case as to dealing with the industrial relations bills, refers to the measures – talks about quite wide spread and systemic criminality in the building and construction industry. To be clear though isn't criminality dealt with by police on building sites?
TREASURER:
Well, the Australian Building and Construction Commission, when it was introduced, led to a significant reduction in the number of days lost to disputes. We have around 70 per cent of those days which are lost in disputes occurring in the construction sector. The construction sector employs around about eight per cent of Australians, and accounts for a significant proportion of our gross domestic product. It's important that sector is firing on all cylinders and isn't held back by the sorts of practices that have been identified in the royal commission, and in the work that was undertaken by the ABCC previously. So, this is an important economic and productivity reform, that's why it's at the centre of our agenda, in terms of recalling parliament for this purpose, because that change, is also a critical change to manage the transitioning economy. That's its real purpose. If we don't pursue this reform, we believe that that is going to put the success of the construction sector at risk, it means that projects and developments will cost more. That's going to undermine investment. It's an important economic reform that needs to be put in place and that's why we have put so much importance on it.
SPEERS:
I guess you need to be absolutely accurate about what it is going to do. It deals with civil breaches not criminal breaches and we have do already have a Fair Work Building Commission in place and it can, it does have coercive powers, it does use them. Why do we need, explain to people why we need this new body in place of what is already there?
TREASURER:
On its record, the ABCC will go the extra step and it will ensure that there is that stronger cop on the beat than we currently have and it's a sector that frankly needs it. Now, I've heard those say, 'well why this sector in particular?' Frankly, because of the level of disputation, the level of activity that we're seeing which is negative to that industry's performance that has been laid and writ large in all the various commissions and reports we've seen. If anyone wants to make an argument out there that the construction industry doesn't require special attention after all of that evidence, and after all of that information, well frankly they're in denial. We're not in denial. We know that the construction sector plays a critical role in underpinning the investment worthiness of Australia as a country, and you've got to get that right, and this is an important part of the process to get it right.
SPEERS:
Let me turn to Tony Abbott, he says the Turnbull Government will be seeking re-election fundamentally on the record of the Abbott Government and he has listed why. Malcolm Turnbull says he is not right and has listed why. How do you feel? Do you feel like you are seeking re-election of the record of the Abbott Government?
TREASURER:
The Coalition has had two prime ministers during this term, and both of those, the Prime Minister was part of the Abbott Government, I was part of the Abbott Government. I was part of the Abbott Government and took the lead role on stopping the boats. The policies that we devised in Opposition, and I particularly devised in Opposition and brought in as part of a new government were very successful. I'm very pleased to go to the next election and say that was an important part of our record. The changes that were brought about in terms of national security and boarder protection more broadly – these were all important parts of the achievement of the election of the Coalition Government. Now, we've got continuity with that, but we've also got change. We've now been able to move on issues like increasing the competition policy agenda, and whether that's on the Section 46 changes that I brought to Cabinet the other week, or whether it's on re-birthing the Harper reforms to drive productivity and fix a lot of the issues that are existing for government service delivery at federal and state level. I mean these are all new agendas; the response to the Murray Inquiry, the abolition of the credit card surcharge, and things like this. These were all things that have been introduced, together with media reform law and so on, which I think demonstrate that yes there's continuity but also there's change. Another key area is in the area of what I call the second phase of retirement income reforms. I mean in last year's Budget as Social Services Minister with Prime Minister Tony Abbott, we introduced the first phase that dealt with pension. In this Budget, and as we go forward to this Budget, Prime Minister Turnbull put on the agenda what is the second phase of that which deals with issues around superannuation. So, there's change and there's continuity and I'm happy to stand on all of that as our record, as to why we should be trusted and are best placed to manage our transitioning economy going forward.
SPEERS:
So, I just want to tease out that last bit you mentioned there. When we do see the Budget on May 3 and those superannuation changes you flagged there it will be crystal clear this is more than just continuing the Abbott Government, this will mark another key difference?
TREASURER:
Well, these are new areas that we've got into since Prime Minister Turnbull put those squarely back on the agenda and we've been working very hard on that. A key difference between the way we look at this and the Opposition, is this, when Bill Shorten looks at superannuation he just sees something he wants to tax. When we look at superannuation we look at, in the need to ensure that it is sustainable, that it provides greater flexibility and choice and it's fit for purpose for a 21st century economy. So, we're looking at how we can improve and better target the overall system of superannuation so it's better super, a more secure future for super. When the Labor Party looks at it, it's just another tax target. I think these are the real differences between us, and again, these issues whether it's dealing with superannuation into the future and making it fit for purpose in a modern economy, or whether it's dealing with investment issues or competition issues, this is why I think Australians are going to trust the Turnbull Government to better manage our transitioning economy.
SPEERS:
We will be able to compare, I am sure, both policies once we see them on Budget night. A final question, one thing Tony Abbott, Malcolm Turnbull, John Howard many others agree with in the Liberal Party is the need for plebiscite pre-selection process in New South Wales, it happens in other states. You are a senior New South Wales figure in the Liberal Party there – are you a supporter of plebiscites as well?
TREASURER:
Yeah I am, look I think they're good changes but the party organisation are the ones who set those rules, and they're already moving down that path in some areas. But, how long it'll take till they move to the next stage as other divisions in other states have done; well I'll leave that to the state executive and the members of the organisational wing of the party. I'm happy to respect their judgement on this and contribute to it as a party member like anyone else. But they're good changes and I think that time will show they'll be fully supportive.
SPEERS:
Treasurer Scott Morrison thank you for your time this afternoon. I appreciate it.
TREASURER:
Thanks a lot David, Good to be with you.