KIERAN GILBERT:
Treasurer thanks so much for your time. As I say the ASX forecast to fall further, shudders right around the world on global markets. What do you think is going on here?
TREASURER:
Well it is still very early days and the analyst reports that are out and the commentary that is there I think is very mixed. What we are seeing happening in China is not unanticipated really. I mean the growth forecasts we have in China on MYEFO are in line with what was being said by the IMF and the World Bank and the OECD, all largely consistent. We kept those in place at that time. This is a time for just being I think very cautious but at the same time having a great sense of resilience in the strength of the Australian economy domestically. Globally there is volatility; there is no question about that. Australians understand that but the fundamentals of the Australian domestic economy I think are very sound and particularly when you look at the employment growth over the last year - over 300,000 jobs created over the last year. We are seeing our domestic economy transition and we need to diversify so things like iron ore prices or one market, albeit our biggest trading partner China, aren’t being so dominant on our economic scene. We are also seeing in the US I think much improved signs and that really does provide a counter balance to what we are seeing in China.
GILBERT:
With the oil price though that has a flow on effect because oil and gas prices generally are scene in the same context and we are about to become the biggest gas exporter. So impacts for us from a number of different fronts not just China?
TREASURER:
Well lower oil prices also mean lower petrol prices and it means inflation also remains very checked and these are positive things. So there are two sides to these coins often and what we are seeing is a lot of movement at the moment but I think the smarter analysts, those looking at this, I don’t think are overreacting to what we are seeing at the moment. I think it is always a time when you see this sort of volatility to keep a cool head. The government’s plan is exactly as we need it to be and that is to continue to do things that boost earnings and boost enterprise in our economy, to boost employment in jobs and we are seeing those results come through and that is very heartening. Also, ensure that we stay very focused on the fiscal task in ensuring that our expenditure as a percentage of GDP continues to decline which it is as was contained in the MYEFO statement late last year.
GILBERT:
But we are seeing already the impact on the hip pocket of Australians. You are saying the employment numbers are good, yes they are but the wages growth is the lowest in 50 years according to the Access Economics report out this morning.
TREASURER:
Well this is why we need to do things that boost earnings. This is why we need to do things that boost enterprise in our economy. We are not earning enough as a country and that obviously has an impact on revenues. In the last MYEFO statement we had some major changes to our growth forecast and that did lead to a significant writing done what some of those revenues were. But the most significant part of those revenue changes in the MYEFO was actually by having a more conservative outlook on growth than had previously been put in the Budget. Now that was just about being I think upfront and having a very realistic set of numbers in that MYEFO statement and obviously they will be under constant review. But the numbers we put in that, particularly on growth forecasts and particularly around things like commodities and so on, seem to be holding out at this point but they will be under constant review as we lead up to the Budget in May.
GILBERT:
The big task for you is the tax reform issue right now. Can you give our viewers a sense of where this is at because obviously the timeline for the white paper and so on was delayed with a change of leadership. Where is this at? What are your plans here and do you need the states to be on board before you take your tax plan to the people?
TREASURER:
The first point is this, the only reason we are looking at the tax system is to ensure that our tax system can be more supportive of growth and jobs. It has nothing to do with our levels of revenue to deal with the Budget issue. The Budget issue will be addressed by ensuring that we get expenditure even further under control and we need to remember that the last 30 years the only time when you are getting Budget surpluses is when you are under around about 25 per cent of GDP on expenditure. Now even on the Budget and the forward estimates that gets us to 25.3 per cent but we need to go further over the medium term to achieve those sorts of goals. So you have got to keep the pressure on expenditure restraint and that is what we are doing. Then you have got to grow the economy. Changing the tax system is one of the biggest opportunities we have got to ensure that we can grow the economy more strongly than we are now because income tax rates, corporate tax rates, these sort of things are holding Australians back who are out there working and saving and investing. That is why we need to change the tax system. We need to change it so we can make our tax system better for those who are already out there doing the hard yards working, saving and investing.
GILBERT:
But do you need the states to sign up to any changes you make before you go to the election or do you go to the election get a mandate and say to the states “ok, this is the Australian people talking, they support this plan you have got to back it as well.” Put pressure on them through a mandate?
TREASURER:
Well we are working consultatively with the states and there were meetings before Christmas which were going down that path. But the ultimate arbiter on these things is the Australian people and we have made it very clear that any changes we would like to make to boost jobs, boost growth in the economy by changing the tax system with a better mix of taxes then that is something we would put to the Australian people. There will be an election later in the year and there will be an opportunity for those full details to be put to the Australian people before an election. Now we will continue to work through these issues and how we will engage the Australian people and the states and territories as well over the months ahead.
GILBERT:
There are two tax options under consideration according to reports over the weekend. Can you confirm that for us? Are there two main options that you are looking at?
TREASURER:
Look they were speculative reports and I am not about to comment on media speculation. The position the Prime Minister and I have taken very consistently is of course we are looking at all the various options that are available to us. The conditioning factor on those is what is going to grow the economy? What is going to boost jobs? Now there are proposals today that are reported from the Financial Services Council which demonstrate that you can change the tax mix and grow the economy. So the goal here of growing the economy, the goal here of growing jobs can be achieved – at least as that presentation demonstrates, by changing the tax mix. Now that is one set of options, there are other options but the thing we have to do is get the income tax monkey off peoples backs and that is what is going to hold them back this year. We don’t want them to be held back because we are in a more globally volatile environment; there are further pressures in the global economy – which are not things we can do anything about. But what we can do things about back here in Australia is ensure our tax system is up the task of the 21st century.
GILBERT:
Finally, to you on the election timing because there is a big discussion point at the moment as we start this year. You have got a lot of political capital with the popular new Prime Minister; obviously you want to use it to get serious reform done. In that context do you think it is better – well privately, apparently, you are saying it is better to go earlier then go later.
TREASURER:
Well that is not true. I don’t know where those comments came from, I have no idea Kieran. But I think it goes to where the silly season over Christmas leads to all sorts of media speculation. We are governing. That is what we are doing and an election will be held later in the year and the Prime Minister has set that out and he believes that will be at the normal time. Australians just want the government to get on with governing, that is what we are doing. There is a lot of uncertainty globally out there at the moment and I think they would be reassured by the fact that the Prime Minister, the Treasurer, the full Cabinet, the Ministers, our whole team is just focused on good stable government which will see a growth in the economy and jobs.
GILBERT:
So we should proceed on the basis that the election is in September?
TREASURER:
That is exactly what the Prime Minister has said and so I don’t see why anyone would think anything different.
GILBERT:
Treasurer appreciate it to the start the year on our new look ‘First Edition’. Thank you very much for that this morning, appreciate it.
TREASURER:
Thanks a lot Kieran, good to be with you.