LEIGH SALES:
With me now though, straight from the floor of the House is the Treasurer, Scott Morrison. Thank you very much for racing straight up.
TREASURER:
Good evening, Leigh.
SALES:
When we look at the key economic data, inflation, growth, spending, the deficit, don't voters have to ask themselves, what has been the point of the three years of this Government?
TREASURER:
We've made enormous strides over the last three years, in particular ensuring 300,000 jobs were created last year. In the last 18 months 50,000 young people, more than 50,000 young people, have been able to find employment. Youth unemployment today is lower than it was at the last election. On top of that we continue to keep spending under control and over the next four years we will see the deficit reduced to 0.3 per cent or $6 billion as a share of the economy.
SALES:
You say you've made enormous strides and you bring up spending so let's drill down into that a little bit. When you came into power your side of politics was outraged by the scale of government spending, it was 25.6 per cent of GDP. This year it is 25.8 per cent. The best you can forecast is 25.2 per cent in four years' time. That's a negligible impact for a Government that's promised to rein in spending.
TREASURER:
Well there are a lot of commitments, Leigh, as you know whether it's in health, education or disabilities or any of these areas. It is a difficult environment in which we've had to work. Whether it is the impact on revenues, of whether it be in the past, parameter estimates, iron ore prices – they have improved in these most recent times. But our nominal GDP growth has been very flat and very weak, and that's had a very significant impact on revenues. But the expenditures, we've sought to pass major changes whether it's in the welfare area or in health and other places, we've obviously had our frustrations with that and I think that's one of the key issues the Australian people will be able to make a judgement on at this next election.
SALES:
You've been in power though for three years. You say you're reducing but actually when you're looking at the cold, hard figures of spending as a percentage of GDP it has gone up from what it was, and it's planned to come down.
TREASURER:
Well, when I took over this job we were heading into 26.2. In the Budget I announced tonight it is 25.8. And at the end of the forward estimates as a result of the decisions that we have taken it will get to 25.2. In this Budget we have not spent more than we've saved. In fact, we have a $3 billion contribution in net terms of spending less than we have saved. In addition to that, net overall, over the Budget and forward estimates on policy decisions, the Budget improves by a further $1.7 billion. So, we are not spending more than we save, Leigh, and we are certainly not increasing the tax burden on the Australian economy, which is the worst thing you could do at a time of such sensitive transition.
SALES:
All right, let's take another Budget staple: the size of the deficit. How is it that three years ago the Coalition was outraged by Labor's inability to return to surplus and yet today unapologetically it's deficit is far as the eye can see?
TREASURER:
Those deficits reduced to 0.3 per cent over the Budget and forward estimates and compared to where we were in MYEFO we are still on track with the same projection to return the Budget to surplus in 2021. That's the projection, that's what it is. If estimates and parameters change then we're obviously hostage to those events. But on the spending and on the tax arrangements we have put in place, that's the current projection. That is a sustainable path towards Budget balance.
SALES:
Sorry to interrupt, because it is a projection. If you look at your record in office; year one deficit $37 billion, year two deficit $39 billion, year three $37 billion – so why should voters trust any more promises about deficit reduction based on your record in office thus far?
TREASURER:
What they can see in this Budget is a clear national economic plan which sets out the spending measures, sets out the taxation measures, and reduces the deficit to 0.3 per cent over the Budget and Forward Estimates.
SALES:
You've been in power for three years though so why hasn't that been in place since the beginning?
TREASURER:
There have been many challenges as you know, Leigh. But the plan we've set out tonight ensures that we continue to move the Budget back to balance over the Budget and Forward Estimates. That is based on the disciplines of not spending more than you save. That is clear in this Budget and those figures are there to see.
SALES:
Since the Abbott-Turnbull Government was elected, you've been talking about the need to make a transition from the mining boom. And yet in these Budget Papers Treasury and the ABS warned that non-mining businesses have yet to commit to significant new investment plans.
TREASURER:
That's true.
SALES:
Again I ask what's the point of a Coalition Government if you can't stimulate business investment?
TREASURER:
That's why we have outlined the 10-year enterprise tax plan tonight, Leigh. That is exactly why, because the key things that are going to drive our economy – over the last 12 months we've seen very strong household consumptions, we have had dwelling investment being a positive contribution to GDP and we've also had the net export sector also making a contribution this year. But you're right, the non-mining investment side of the equation is the thing that we have to boost. That's why you have an enterprise tax plan which reduces the tax burden, particularly on small to medium sized businesses, who are the ones we want to make that investment.
SALES:
But again, I hate to sound like a broken record, but you've been in power for three years. Why haven't we seen business investment pick up over that period of time?
TREASURER:
It is a difficult economy, Leigh. That's why you need to put out the enterprise tax plan that we've announced tonight. That's why what you do by ensuring you're cracking down on multinationals and you're removing access to the generous superannuation concessions to the top 4 per cent. I mean tonight we have changes to superannuation which will ensure we will raise $6 billion from the top 4 per cent of those with superannuation funds and invest that money back in the earning economy with tax cuts and widening the middle income tax bracket and tax cuts for small to medium size businesses, so they can get on and invest and employ.
SALES:
You're pinning a lot on achieving growth and yet in these Budget Papers Treasury is warning that low inflation, low wage growth and productivity – which are all factors Australia currently has – are a major threat to the growth outlook.
TREASURER:
Well of course they are. That's why the enterprise tax plan and the other tax measures in this Budget have been a model to show 1 per cent increase in GDP, that's $16 billion.
SALES:
But are you not being a little optimistic when you look at those other factors I've just outlined?
TREASURER:
No, I don't believe we are. Over projections, they're consistent, whether you're looking at our projections on China and their growth, and that's consistent with what's happening with other international forecasters. We've actually revised down the nominal and real GDP figures in the current forecasts. In the December update we had a very candid reassessment of those forecasts pulling the projections down from 3.5 to 3 per cent. And we've had, with the change between MYEFO and now, very little impact on the net impact of parameter estimates over that time.
SALES:
You take, say productivity, you say you're not being overly optimistic. In these Budget Papers Treasury's warning that Australians…
TREASURER:
I'd say we are being realistically optimistic. Like the Australian people: 300,000 jobs, and 3 per cent real growth last year, which means we're going faster than the UK, US, twice as fast as Canada up there with South Korea…
SALES:
But these documents are making it very clear that there are very significant risks on the downside. Take productivity, for example, the Treasury is saying the country needs to lift annual productivity growth from 1.6 per cent to 2.4 per cent if Australians want to enjoy the same living standards. It notes that would be greater than the lift caused by the major economic reforms of the '80s and '90s.
TREASURER:
True.
SALES:
And yet where is your economic reform in this Budget that in any way rivals those reforms that were introduced in those eras?
TREASURER:
Last year we already, as the Turnbull Government, announced the adoption of the Harper reform process. You're right, the Hilmer Reforms increased GDP growth by 2.5 per cent over 12 years. We have adopted the Harper Report which will see a similar improvement in productivity and growth in this country, and we've already engaged with the States and Territories on that agenda.
SALES:
Do you think that is the equivalent of, say, floating the dollar or lifting tariffs?
TREASURER:
I think it is the equivalent of the Hilmer Reforms, yes I do, and that's what Professor Harper thinks as well. That's why we've embraced them. That includes, as you remember, changing the misuse of market power rules which is going to give small business even greater opportunities to compete out there, particularly against larger businesses. So, they were big reforms which were kicked into the long grass for 10, 20 years and the Turnbull Government adopted them.
SALES:
You say maybe I'm being a little bit pessimistic.
TREASURER:
I'm going to cheer you up a bit, Leigh.
SALES:
Let me bring in the Reserve Bank at this point. They have cut interest rates today. Isn't that evidence they don't quite share your optimistic view of the health of the economy?
TREASURER:
No, I don't think that's the right way to read it, Leigh. The Reserve Bank today was focusing on the inflation numbers. They have an inflation target of between 2 and 3 per cent. And looking at that inflation target and where the most recent inflation numbers have come in, they have formed an assessment they are now in a position to make the change to rates they have. And they've been able to do it because their view is after the changes that the banking regulator, APRA, in late last year made, which has cooled off what we have seen in some of the hotter-running housing markets they feel they can now make that change to rates without seeing that overheating return. So, what the bank has done today has been very much about inflation. The Reserve Bank Governor was very clear today when he said the economy was transitioning well and in all my discussions with him that has been reflected in that discussion.
SALES:
Ok, one final question before we let you go.
TREASURER:
Sure.
SALES:
We are about to go to an election. On the economic data, very little has changed over the three years of this Coalition Government despite your promises before the election that you would tackle the so-called Budget emergency. Why then should you be re-elected?
TREASURER:
We have got a national economic plan for jobs and growth to support a strong new economy and the transition from the mining investment boom to the more diversified new economy. We've set out that plan clearly tonight with tax cuts for small business, a defence industry plan which is supporting new high tech jobs into the future for decades, backing innovation and science, including start-ups for new small businesses, ensuring the Budget is moving back towards balance and we can afford the investments in health, education, roads and dams and all of these things which are necessary to take us forward. Australians know that the challenges are great but this is an economic plan which is up to that challenge and we're ready to put it in place.
SALES:
Treasurer, thank you very much for coming in.
TREASURER:
Thanks a lot Leigh. It's good to be with you.