DAVID SPEERS:
Just on these National Accounts, they are much better than three months ago; 2.5 per cent annual growth, 0.9 of a per cent quarterly growth. The exports are the big driver here. The best export numbers in 15 years. You must be pretty happy that the Australian dollar has come down as much as it has?
TREASURER:
Well, that is one of the automatic stabilisers in the system and of course we also have very low levels of interest rates as well which also provides good conditions going forward for business investment to improve in the future. In these National Accounts figures we have got strong household consumption, we have got strong exports and that is compensating for the entirely predictable decline in business investment, not just in the mining sector but more generally in the economy. This consumption, this increase in demand, this increase in demand both from overseas and within the household sector, that will lead down the track to creating the right conditions for business investment to come in as well. So, the economy is going through a transition David. I think all Australians understand that. This is what occurs when you move off the biggest investment boom in the mining sector the country has ever seen with the highest terms of trade, the highest levels of commodity prices and now the economy is diversifying, it is broadening, it is transitioning and Australians are making that transition and we are backing them to do it.
SPEERS:
Would you like to see the Australian dollar though come down even further?
TREASURER:
Well, that isn't really something I speculate on. It will be where it will be. What I want to see is growth positive policies. We need a growth friendly tax system, we need a growth friendly innovation system because that is how you drive jobs in the economy. We will deal with the set of circumstances that are before us. We can't control global issues, we can't control where the dollar goes but we can control how we run the tax system, we can control the policies around innovation. We can work to control our expenditure to make our Budget stronger and to improve our financial system through our response to the Financial System Inquiry and of course drive micro-economic reform through our response to the Harper Inquiry. So, we are going to focus on the things that we can focus on and we will deal with the circumstances just like all Australians do. They have to deal with the circumstances in front of them and again that is why we want to back them so strongly.
SPEERS:
Now, your emphasis on growth is interesting. When it comes to tax reform, innovation, your competition reforms, you keep stressing growth is what you are trying to do. Is that your approach on the Budget as well and is it more important to achieve growth than to achieve a Budget surplus?
TREASURER:
It is always important to achieve growth because that is what supports jobs and that is what is most important. When someone has a job they have a choice, when someone, when a family has jobs they have choices, they can plan for their own future, they can save for their retirement. They can do the things that make them more independent financially. So, growth is the most important thing in that context. In terms of the Budget, there are two things you have to do; you have got to control expenditure and it was only a few months ago when expenditure to GDP was over 26 per cent. Now, the Budget forecast for this year is 25.9 per cent and we have been working steadily through the MYEFO process over recent months to make sure we are on track there and we will be making some announcements in the mid-year update. So, you control expenditure and you have policies that drive growth. That is how you build revenue you have got to increase what Australians are earning, what the country is earning. You don't deal with revenue by jacking up taxes, that is Labor's approach - not ours.
SPEERS:
So, are you signalling there that spending at 25.9 per cent isn't going to increase any further under your watch?
TREASURER:
Well, MYEFO is the time to update those numbers and we will continue down that process and we will make those announcements at that time.
SPEERS:
Alright, but you are sounding pretty confident that you have got it under control, and want to keep it under control.
TREASURER:
Well, look, this is the task. Now, you have to control expenditure - that is the first thing you have got to do in terms of getting your Budget under control. If you just simply say you can raise taxes to cover over a multitude of spending sins, well you know where that ends up? It ends up where we inherited from the Labor Party after their six years in office. That is the way they ran the Budget and they ran it off the road. Now, we have been getting it back on the road. Over $60 billion worth of savings measures - there could be more by the way but the Labor Party continues to stand in the way of savings measures. They had outstanding commitments of almost $60 billion in terms of savings they want to reverse, savings that they are blocking and then at the same time only coming up with some $5 billion to pay for it all. That is just sort of the fiscal recklessness we were used to them doing in government and they have clearly learnt nothing in opposition. That is why they can't be trusted to return to the government benches.
SPEERS:
On the revenue side there are warnings again today that the iron ore price falling much further than was forecast back in the May Budget. Is that a worry to you? Is that going to hit the bottom line?
TREASURER:
Commodity prices have been falling and on the terms of trade side of things when we have had about an 18 per cent decline in that since the last election, these two factors obviously weigh heavily on revenue estimates when you are putting these mid-year statements together. So, that is obviously an issue that we will continue to monitor closely and closer to the release of MYEFO we will have to crystallise an assumption around that. That is obviously a variable that has an impact on the Budget. What you don't do with these types of things is you don't chase those things down the hole. They are the parameters at which you have very little control, what you do when you manage a Budget is you focus on the things that you can control and that is what we are doing and then you work through the rest.
SPEERS:
So, if you are not going to chase that lost revenue down a hole we are going to see a deficit worse than $35 billion?
TREASURER:
The MYEFO will set out where the Budget is at, at that time. As a government what we are going to do every year, every day is get about the task of returning the Budget to balance and into surplus. To strengthen the Budget every day. But we are going to do it in a way that is not going to undermine growth in the economy, we are going to do it in a way which I think ensures our spending is fit for purpose and that is the real rule across spending. There are measures that we are seeking to get through the Senate, particularly in the family tax benefit area but there are others where the opposition has blocked us. People talk about the crossbench. The crossbench would not be a consideration in these issues if the Labor Party actually were interested in doing things to assist the Government fix the fiscal mess that they themselves created. So, I hold the Labor Party to account for their failure to support the Government and the saving measures that we are putting forward and we could be doing even better than we are now but they have decided to continue to wreck the Budget from opposition.
SPEERS:
Final question Treasurer, Fairfax reports your predecessor Joe Hockey took a tax plan to Tony Abbott for a 15 per cent GST, 20 per cent company tax rate and a top marginal personal income tax rate of 40 per cent. Have you looked at that proposal? Do you like the sound of it?
TREASURER:
Well, the work that I did was to present the outcomes of the work that was done under Treasurer Hockey to provide information to the states and territories which the states and territories were seeking on various GST options. So, that is the work that has been presented to the state treasurers, that is the work that I am aware of and that has been presented. I have made reference to that in the Parliament and other press conferences and the only person who actually commissioned, sought, modelling done by Treasury off their own bat was actually Chris Bowen and he has 'Scenario 3' out there which he hasn't approved the release of any details on. Now, that was an expansion of the GST of both its base and an increase in its rate. So, I would be very interested to know what scenario one and two was and four, five six up to eleventy-seven but he refuses to come clean on what his own modelling on a GST was.
SPEERS:
But this modelling from Joe Hockey, that he commissioned, you have obviously had a look at it?
TREASURER:
What I said was we presented the impact of the various options to the states and territories - that is what they asked for. So, there is no secret about that. I don't think there is anything terribly sensational about that at all. The states and territories sought that from Joe and that work was done and I presented it at the last meeting of state treasurers. So, that was part of the process initiated by the states and territories. What we are looking for is a growth friendly tax system. We are looking right across the board on taxes. When a Coalition Government seeks to improve the tax system we do it by cutting taxes. That is our goal here to ensure that our tax system is growth friendly - that is my goal in this exercise and other goals are frankly subsidiary or irrelevant to that.
SPEERS:
Treasurer, Scott Morrison, we appreciate you joining us this afternoon. Thanks very much for that.
TREASURER:
Thanks David, thanks for your time.