SPEERS:
Treasurer thanks for joining us this morning. Labor unveiled this franking credit policy during the week and its vote went up in Batman last night. What does that tell you?
TREASURER:
Well Batman was about a race to the left and the Labor Party won. They are the most left wing political party in the country. I wouldn't describe Batman as a mainstream electorate and if Bill Shorten wants to run the campaign in Batman around the rest of the country, I'd say 'bring it on Bill'. What he has basically sought to do there is appeal to those who want to give Bill Shorten all of their money and trust him on how he is going to spent it. I doubt very much whether the rest of the Australian population would feel a similar way.
SPEERS:
But is it possible that a lot of working Australians who may not have even heard of franking credits don't think this money should be paid to share market investors.
TREASURER:
No, I think there is a long way to go on this issue. What happens with a lot of people who receive their income in this way, it may be done by their accountant or others, and they see the money come into their bank account and they'll often think it is just the dividend income they've received, not even the rebate. What will become clear in the weeks and months ahead that what this simply is, is a mean tax grab on people who can least afford it. I mean the whole purpose of a tax refund in this case, is it's designed to support people on lower incomes and have low rates of tax because they are in the retirement phase. I mean the great injustice of this, is that you and I, David, as we've discussed, if we have franked dividends we will get the full benefit of those. This actually helps people on higher incomes because they'll maintain getting the value of their franked dividends, but if you've got a low income, if you have a low rate of tax because you are in retirement phase, well it's designed to hit you. Bill Shorten is deliberately hitting people who are lower incomes, on pensions, and in retirement phase. It's Labor's Retirees Tax.
SPEERS:
It's true there are quite a few pensioners, over 200,000 affected by this ...
TREASURER:
It's 230,000.
SPEERS:
230,000, but you have to agree there are roughly a million more that aren't pensioners. There are indeed among that million some wealthy retirees.
TREASURER:
And they are people on low incomes, and I'll tell you exactly who they are. Of the individuals who are affected by this, 85 per cent of them are in the bottom three tax brackets; the bottom three tax brackets. That's less than $87,000.
SPEERS:
But we know Treasurer a lot of retirees don't pay tax because their superannuation in their income phase is tax free.
TREASURER:
Well it's not actually. Because as you know, two budgets ago we put a cap on how much superannuation you can have in your retirement phase and pay no tax on it.
SPEERS:
You can have $1.6 million. And the income is tax free.
TREASURER:
That's right. That's why people put their money into superannuation. What Labor are saying, the people who will be most hit by these measures, are people with the lower balances. They are the people who aren't above the big cap, they are people who have lower rates of tax, they are pensioners, they are individuals. I mean let me give you this figure: 70 per cent of people who get the benefit of franked dividends are in the top two tax brackets, so they are going to keep doing that; they'll get the full value. This is why this is fundamentally unfair. I mean Labor support this when they were in opposition and was a policy they took to the 1998 election because they knew it would support people on lower incomes and lower tax rates and pensioners, and the pensioners that I'm talking about are people John Howard said should go and buy those privatisation shares and that other Prime Ministers and Premiers, GIO and so on; they went and got a few of those shares and they use these refunds to pay their power bill, and not just a part of it, all of it.
SPEERS:
But is there some middle ground here where you protect your pensioners and put a cap on these cash refunds; a cap of say $50,000. Then it means those who are claiming hundreds of thousands of dollars through this, can no longer do so.
TREASURER:
No David, you either have a franking system for company shares - the company has paid tax on these shares, on these dividends, that's the way franking works, that's the way dividend imputation works. Now if the Labor Party wants to abolish dividend imputation, well that's a matter for them, but that would be double taxation. I don't see why it's fair for double taxation to apply to a pensioner or someone in the retirement phase more generally or someone on a low income, but it's okay not to have double taxation for people on higher incomes.
SPEERS:
Okay you won't touch ...
TREASURER:
Labor fundamentally doesn't understand this issue.
SPEERS:
You won't touch this at all, even for the wealthiest.
TREASURER:
No, of course not. No. Because it is bad policy. We fixed this policy with Peter Costello back in 2000. It was a fundamental design flaw in the original policy by Paul Keating. We fixed it, the Labor Party agreed it needed to be fixed, and this is what it is: Bill Shorten is saying to the Australian people: 'give me all your money and trust me about what I'll do with it'. We don't agree with that. We don't think any government should say that to Australians; that's why we want to keep taxes as low as possible.
SPEERS:
So what he will do with it, he's made it pretty clear he wants to spend a lot of this money on a tax cut for lower and middle income earners. Does that mean Treasurer you will have to sharpen you pencil on the tax cuts you are going to unveil in the May budget.
TREASURER:
We are not looking to bring tax relief by putting people's taxes up. That is what Bill Shorten is planning to do. But then only after he has spent all the other money that he plans to spend. The reason why Labor abolished the tax speed limit, let's not forget this, it's a very important point. Labor used to support a tax speed limit in the economy. They have walked away from this for one very simple reason: They know they need to jack up taxes as high as they possibly can to keep up with the spending commitments that Tanya Plibersek and everyone from the left wing of the Labor Party; you just heard Ged Kearney say it, Ged Kearney saying 'they've heard the message in Batman' Yep, they would have heard it on everything from higher taxes, weaker border protection and big spending; that's the message for the Labor Party. Bill Shorten has apparently heard it and they'll be bringing that message to Canberra. That is not a good sign for the Australian people under a Shorten Government if he is ever elected.
SPEERS:
Do you think though, the average worker won't care too much about that if at the end of the day Bill Shorten is offering them a bigger tax cut than you are?
TREASURER:
It's mum and dad's income they are talking about. People's mums and dads, their aunties and uncles, brothers and sisters, they have these shares. They get this important cash in their pocket. By the way, it's not welfare Bill. Bill thinks this is welfare. He equates this with a welfare payment. It's not, they bought the share. They get a dividend, it's fully franked, they should have to have tax paid on it twice. This is the problem with Bill ... SPEERS: So you are saying 'our tax cuts will be smaller, but we will protect Mum and Dad's income? TREASURER: You are assuming what Bill Shorten is going to do on tax. The only thing I know Bill Shorten will absolutely do on tax, is put it up. Because he has $220 billion of higher taxes on everything from housing, to savings, to retirement, to family businesses, to small businesses, I mean he's got the big stick out and he's whacking on the backswing, he is whacking on the follow through. This is a big tax stick.
SPEERS:
It does give him a big war chest though. So does it influence your thinking on the tax cuts ahead of the May Budget?
TREASURER:
No David, but this is the point. He claims he is getting a war chest. Where is he getting it from? He is getting it out of your pocket. He is pillaging your pocket to pursue his political interests.
SPEERS:
Well if you are shareholder or property market investor, yes. But again, average workers may not see it that way.
TREASURER:
No, no no. I'm sorry David, with respect, 230,000 pensioners cannot be dismissed that lightly. And the overwhelming number of people who negatively gear - 80 per cent thereabouts - these are people not on extravagant wages, they are mums and dads saving for their future. This is Bill's trick. He wants to say 'oh it's only this bit, and this bit, and this bit - that has nothing to do with mainstream Australia'. But guess what, it does. It is sneaky, it is shifty. Bill Shorten is shifty as when it comes to tax, and a whole bunch of other things.
SPEERS:
So nothing in the Batman result has changed your view on the politics of this?
TREASURER:
Neither to policy or the politics. The message from Batman to Bill Shorten which he has apparently heard, is weaker borders and higher taxes.
SPEERS:
Now you're about to fly out to a meeting of G20 finance ministers and central bankers in Buenos Aires. What's going to be your message to your counterparts there, including the United States on any plans to introduce new trade barriers?
TREASURER:
Well yes I'll be meeting with Secretary Mnuchin there as well as Chancellor Hammond and Bill Morneau from Canada and a whole bunch of other ministers, Italy and so on. The key issue of the meeting is going to focus on the digital economy and how taxes work in the digital economy and how we make sure multi-nationals pay their fair share of tax. We have already done a lot of work in this area. Another area we will be focussing on is how we get the infrastructure and the private-public partnerships that go to driving that infrastructure investment around the world, happening. And also an obvious point we always make at these types of meetings, Australia does not back away from our position on free and open trade. It was only this week, it seems a little while ago I suspect. But those 2500-3000 jobs down there at Port Kembla where the Prime Minister and I were on Monday, that we we able to announce what we had been able to achieve which was a win-win for jobs both in Australia and the United States. I think that demonstrated another strong week of achievements for the Prime Minister in terms of getting results on trade. Yesterday and today we've had the ASEAN forum here with ASEAN leaders here in town and the focus of those discussions that I was involved in yesterday has been about the importance of trade, and infrastructure and investment and lower taxes by the way. Lower taxes is something, particularly when we are talking about business taxes in that context which drives investment, sensible economic policy understand that you need to do that to get the investment, to get the jobs and get the higher wages. Other leaders in the region understand that, the only person that doesn't is Bill Shorten.
SPEERS:
Treasurer Scott Morrison I appreciate your time this morning.
TREASURER:
Just before I go David, congratulations to Premier-elect Marshall in South Australia. This is a tremendous win for South Australia. The South Australian election was very much about the economy and in the same way the Tasmanian Liberal government was returned in Tasmania for their good economic management, in South Australia Premier-elect Marshall has been elected because of their trust in Liberals to manage the economy and I think that is an outstanding result for Stephen, and congratulations.
SPEERS:
Just on that, does it put the Federal Government one step closer to securing the National Energy Guarantee that it has been trying to secure, and win the states over on.
TREASURER:
Absolutely. What we will now have is sensible energy policy in South Australia. That is a very welcome addition to the COAG table, not just having a Liberal Premier around that table, and a Liberal Treasurer, but the sensible side of energy policy coming back to the discussion out of South Australia I think will be most welcome, and we look forward to the contribution that South Australia will be making around that table. Not just on that issue, but on many other issues. But for the same reason Will Hodgman as an incumbent was returned for his strong economic management, in South Australia Labor was booted out, and for once we had some fair boundaries in South Australia which could ensure the South Australian people would get the government they voted for.
SPEERS:
Scott Morrison, thank you.