PARKER:
Treasurer Scott Morrison, good morning.
TREASURER:
G’day Gareth.
PARKER:
Nice to see you. Thanks for coming in, got your West Coast Eagles tie too.
TREASURER:
In respect of Mark Barnaba, who I’ve just put on the Reserve Bank board. A great Western Australian, taking over from John Akehurst. But the deal is, at his first Reserve Bank board meeting he has to wear one of my Cronulla Sharks ties. That’s only fair.
PARKER:
That’s the quid pro quo. 9221 1882, that’s the number to call. The Treasurer’s here til the top of the hour. He’s happy to take your calls if you’d like to have a chat to him or put a question to him today on the morning program.
TREASURER:
Sure.
PARKER:
You’ve just come from a business breakfast, which you’ve made a speech. You’ve been making some comments over the past 48 hours on the GST, it’s obviously the barbeque stopper in this state.
TREASURER:
Yes.
PARKER:
We’ve spoken before about it on the program. We know that you’ve referred this matter to the Productivity Commission, they’re going to review it. Nonetheless, you’ve made some commentary in recent days about whether states are fully developing their economies and you think that this needs to be a relevant factor in GST deliberations.
TREASURER:
Yeah, and that’s what I put in terms of reference for the Productivity Commission. They’ve been asked specifically to look at the way that states and territories exploit their own resources. Now it’s one thing for a state to make a decision to have moratoriums, and they are perfectly entitled to do that if they wish, but why should Western Australia have to subsidise that decision with how that GST system works. One of the reasons I wanted the Productivity Commission to look at this, I just didn’t want them to look at the technical aspects of all of this. I wanted them to tell me, is the way we are distributing GST costing our national economy? Is it costing jobs? Is it costing productivity? Is it making the country not move as quickly forward as it could? If the answer to that is yes, then I think that provides a very strong basis to make some progress here, and I think that’s the very first question you’ve got to ask. That’s what I’m doing.
PARKER:
When we last had you on the program, you made the point that this can’t just be about Western Australia versus the rest. You’ve actually got to mount, if we want to see some change, a national interest argument.
TREASURER:
Well that’s right. That’s in Western Australia’s interest as well, I believe. You don’t want any politician making arbitrary decisions about where the money goes, it would be a lottery every year as to what happened. There needs to be a sensible, durable, common sense way of actually doing this. What I think has happened here in WA has highlighted that there’s a problem. There is a problem.
PARKER:
You recognise the fundamental inequity of 34 cents in the dollar here versus four dollars for the Northern Territory and a range of other outcomes in between?
TREASURER:
$4.66 to be precise in the Northern Territory, where I was the other day. That’s why we put $1.2 billion extra in on top over the last three Budgets. It’s not just me saying it. We’ve said it with $1.2 billion in additional infrastructure spending, including the Forrestfield Airport Link and things like that. We’ve put our money where our mouth is when it comes to acknowledging that there’s an issue. Then you’ve got to address how you’re going to fix it. So where are the weaknesses in the system? Where I’m looking to see if there are weaknesses is what are the weaknesses that are holding the economy back by how we do this? Over in the eastern states, as you know, it’s a different issue than here in the west because of the way your electricity market works. But in the east coast, there’s a massive problem with gas supply. That is the key thing driving up electricity prices at the moment, particularly wholesale electricity prices in states outside Western Australia. When you’ve got a lock up on resources, well that’s costing the economy. What we want to see is a system that’s fair. It’s important to recognise, I know there’s a lot of interest in this from Western Australia so forgive me for going on about this a bit, there are two important principles here. One is, wherever you live in the country, Bunbury, Broome, Perth, Sydney, Darwin, whatever, wherever you are, there’s an expectation that all Australians should be able to access services at a reasonable level and at a similar standard.
PARKER:
No fair minded West Australian disagrees with that proposition.
TREASURER:
Exactly. So that’s the fair go principle that the formula is supposed to be based on. I don’t think anyone disagrees with that, so we have to respect that, and that’s why one of the reasons that the GST is not just distributed on a per capita basis.
PARKER:
So a per capita distribution is off the table, because there does need to be a level of equalisation?
TREASURER:
I’m just saying, that’s the reason why it’s never been done that way before because of that principle which I think we all agree with. So then there’s a second issue, so we all agree with the fair go principle, so how do you achieve that? Now every state and territory has to do all its own heavy lifting to grow their economy to ensure that their own states have been able to be in a position to expand their services, have employment and so on. They all need to do that, and that includes making the most of the resource opportunities that you have. Now, if this formula is actually giving states leave passes to not act on that, and then penalising Western Australia for acting on it, that’s a bit of a problem.
PARKER:
Yeah, well I think it’s also a problem for some states, and I’ll take Tasmania for example, where about 40 per cent of that state’s income comes from the GST and about 20 per cent of that state’s income comes from the GST above the per capita share, and yet we’re confronted with front pages of the Hobart Mercury that say, ‘WA hands off our GST’. Surely that’s not a good situation for Tasmania to be on, so utterly reliant on handouts effectively from other states?
TREASURER:
Well the GST distribution system is a bit like a safety net for smaller states. Tasmania, Northern Territory…
PARKER:
There’s safety nets, then there’s safety nets.
TREASURER:
I agree but Tasmania, South Australia, Northern Territory, don’t have economics of the size, scale, population. I mean there’s less than 300,000 people in the Northern Territory, there’s a bit over half a million people in Tasmania. Western Australia is a lot bigger than that. So that’s the fair go principle that you’re trying to even out, but you’re right, every state and territory has to become as self-sufficient as it possibly can. Western Australia’s certainly picked up on that over many years, but let’s not forget, quite a number of years ago – I know it’s been a while – but Western Australia also in the past was the beneficiary of this system. They actually, a long time ago, used to get more from the GST than other states. We’re well past those days now, certainly, it’s gone in completely the opposite direction to absurd position.
PARKER:
Let’s go to the phones. Alistair, good morning.
CALLER:
Good morning Gareth, thanks for the opportunity to speak to Mr Morrison. My suggestion I guess, when Parliament resumes we have to put pressure on Shorten to accept whatever results the Productivity Commission comes up with. He reneged on the Fair Work Commission and we’ve got to make sure pressure goes on him to accept it. There’s no good talking about all the things that have gone wrong with it, let’s accept the Productivity Commission and force Shorten in Parliament to say he would accept it.
PARKER:
I’m sure you’d agree with that proposition Treasurer.
TREASURER:
Well I would. I would like Bill Shorten not to play politics with this.
PARKER:
So would we.
TREASURER:
I would like him not to play politics with energy prices and locking coal out of any sort of future in this country in the next 40 years which is essential to provide baseload power particularly in the eastern states. I would like him not to play politics with the National Disability Insurance Scheme for goodness sake. They are the ones who said we had to increase the Medicare Levy to pay for this scheme. They acknowledge that never did the job and now they are playing politics with disabilities. So yes I agree with you, I wish Bill Shorten would stop playing politics with peoples’ lives.
PARKER:
Just on the Productivity Commission inquiry. This isn’t the first inquiry. I applaud you and I have said so before that I applauded you for commissioning the inquiry. It is not the first time it has happened. We have had about three in relatively recent times. Can you give us an undertaking on the show here today that whatever the outcome of the inquiry that you will legislate the recommendations?
TREASURER:
I think there is some misunderstanding about what it is I have asked them to do. What I have asked them to do is tell me whether the way we currently do it is costing the national economy. Now if they say it is, then of course we would have a national basis for acting. Now it is not necessarily the task of this inquiry to come back with some sort of prescriptive recommendation about what it should change to. That is work which would then have to be done but what I can assure you of is we are seeking to address this issue. I said very clearly in Perth that I think there is a problem and we have to solve it and do it in a way that is durable, that puts the politics aside and at the end of the day grows our economy because everybody wins from that.
PARKER:
Because ultimately everyone listening to this interview knows that what we want is action. So we are very appreciative that we are looking at the problem but ultimately you are going to need action here or you are going to be in strife with the votes. I’m just telling you.
TREASURER:
I don’t walk away from that. That’s why I am here. But you have to do it methodically which is what we are doing. I think there is a problem, I think we have to solve it, I think this is the way to do it.
PARKER:
Trevor, good morning to you.
CALLER:
Morning Gareth, morning Treasurer.
TREASURER:
G’day.
CALLER:
You talked about looking at things that hold back economic growth. I work in the financial sector and the regulators under your stewardship under the moving real estate markets in Sydney and Melbourne and Sydney virtually allowed the banks to increase interest rates for investor lending. Of course the banks took that a bit further and increased interest rates for existing [inaudible]. Basically gouging. And it was introduced at a time when the real estate market in Perth is at a low ebb. This one size fits all regulation has killed the real estate market in Western Australia.
PARKER:
Thanks Trevor.
TREASURER:
Well I would make two points. You would know firstly the real estate market in Western Australia was moving well ahead of all of this. That is the first point. The second point is what we have seen with the banks more recently on these new controls trying to temper overheated investment in the eastern states, we have now seen ANZ and NAB actually cut mortgage rates for principal and interest loans for existing and new customers. Yes they have acted on the interest only loans and I will tell you way they are acting on interest only loans. It is not just about the housing market. It is actually about the very high levels of household debt in this country…
PARKER:
Are we too indebted?
TREASURER:
It is at almost 130 per cent of GDP. Now that is one of the things that overseas rating agencies are looking at Australia and saying we are a bit worried about that and you guys need to get this under control or we will downgrade your credit rating.
PARKER:
A former Reserve Bank board member said earlier this week that he expected there would be eight interest rates rises in a row. Whether or not that happens is a matter for the crystal ball but in any case do you believe Australian households are vulnerable if interest rates rise when they will eventually rise?
TREASURER:
There is no doubt we need to keep a control on growing debt and that is what we are doing as a government. We have reduced the growth in debt by two thirds since we have come to government and continue to do that and keep expenditure under control. Our rate of expenditure growth in Australia under this government is at the lowest level of any government in Australia, Labor or Liberal, in the last 50 years. So we are keeping expenditure under control. Those are the facts. Coming back to the caller’s question, I get it that the Western Australian housing market is moving in a very different direction to the east coast. That is why we are not abolishing negative gearing or the capital gains tax concessions which the Labor Party wants to do. If you really want to put the Western Australian housing market in the proverbial, well abolish negative gearing. Now the other thing we did in the budget was that we are giving powers to APRA to be able to discriminate between where these investor only loan requirements can apply. So they will have the power to differentiate between Western Australia, South Australia or even parts of the country specifically.
PARKER:
City versus rural?
TREASURER:
That’s right. So I think that is the sort of flexibility for exactly the reason you are raising that is needed. There are similar issues in Queensland by the way and what I don’t want is housing policy driven by Sydney and Melbourne.
PARKER:
Treasurer, is Tony Abbott helping the government’s cause at the moment?
TREASURER:
I don’t know, you would have to ask him. I am not terribly focussed on it to be honest.
PARKER:
I mean he is making a lot of policy pronouncements. A lot of them seem to be fairly well targeted at the Prime Minister or Christopher Pyne. Is it a distraction, does it make your job more difficult to convince the country that you are doing your job and getting on with things?
TREASURER:
It is not distracting me. I suppose you will just have to put it to him. I know the media and others get terribly excited about these personalities. They got really excited about Kevin Rudd as well.
PARKER:
Look at how that ended.
TREASURER:
Well it didn’t end well for Kevin Rudd.
PARKER:
It might not end up well for Tony Abbott and Malcolm Turnbull.
TREASURER:
Again, politics is not a soap opera and I think Australians, that’s why they have turned down the noise on Canberra as I said last weekend. Frankly the media focussing on it too doesn’t help the process but I am not whingeing about the media. I think people are turning down the media on this too. They are interested in what the caller was just ringing in about. They are interested in what is happening in their housing markets, what is happening with the GST here in Western Australia. They do not care about Tony Abbott, ‘ScoMo’, Malcolm Turnbull, Kevin Rudd. All of that is just frankly bunkum.
PARKER:
Treasurer thanks so much for coming in today.
TREASURER:
Good to be here with you Gareth. We will be reporting back mate. I am sure you will be holding me too it.
PARKER:
I look forward to it.