MICHAEL BRISSENDEN:
Treasurer Morrison, good morning.
TREASURER:
G'day Michael.
BRISSENDEN:
In the few months we've all been discussing this, the rhetoric has changed somewhat hasn't it? Tax reform will now be modest and roll out over many, many years. Why?
TREASURER:
The threshold question the Government had to finalise was a tax mix switch: that is increasing the GST to 15 per cent to deliver large personal income tax cuts, was that a possible reform that would deliver jobs and growth and be implementable. We did the work on, we didn't rule it out for political reasons. If that was the case we would have done that last year as previous governments have done. What we did is the work, we worked out that the growth outcome was very modest and by the time you'd worked through all the implementation issues, and what it would have meant for implementation than that could have led to a 1 per cent increase of GDP on our base. So that was not a goer and that threshold issue had to be resolved in order to then frame the other things we are able to do on tax for this year's Budget.
BRISSENDEN:
That's the GST obviously you're talking about. Politically at least there's never been a better time to be a Treasurer for you in terms of political capital. You might not have so much fiscal capital...
TREASURER:
Well, there is not a lot of fiscal headroom and there is certainly not a lot of global economic head room on these things where growth is. The good news is though that our economy is one of the fastest growing in the developed world. We're an economy where conditions and confidences are strong and we've seen over 300,000 jobs in the last year and youth unemployment coming down to below where it was at the last election. While there is some global turmoil, no doubt about that, our story of transition is very positive one.
BRISSENDEN:
Sure, there's a lot of public good will behind the new Prime Minister as well. There's a lot of public perception that something is going to be done, the polls probably aren't going to get better for you. Why not take this moment and really do some big things?
TREASURER:
What you're suggesting is that we should have gone ahead with the GST change, this was somehow some litmus test of tax testosterone. It's not.
BRISSENDEN:
Negative gearing is another one.
TREASURER:
Well, we haven't ruled out any of the other matters that obviously are part of that discussion and those matters will be brought to finalisation in the Budget. The Budget is always in May – it is never in February so there is no change to that. We will continue to work through those issues. I don't think announcing higher taxes, new taxes, is policy – they're just higher taxes. I don't think that counts as policy – it's just money being taken from people's pockets. What I set out yesterday is what we have to do to continue the positive transition in our economy, particularly in very globally uncertain times, is we need to make sure things are sober and they are modest to ensure that we can keep that growth on track. That means that we will seek to reduce the personal income tax burden wherever we can. If you don't have the big increase of a GST to fund that, well, you need to fund it from other changes in the tax system but that makes the scale and scope much less.
BRISSENDEN:
You say you haven't ruled out tackling negative gearing?
TREASURER:
We're meticulous about not ruling things in or out. We have ruled out the GST because we have done the work and that is out.
BRISSENDEN:
You have ruled out going as far as Labor's plans for negative gearing.
TREASURER:
I've made big criticisms of them because I think it will penalise ordinary mum and dad investors who will get crowded out of their negative gearing opportunities by those on high incomes.
BRISSENDEN:
Ok, it is also projected to save about $7 billion a year after about 10 years.
TREASURER:
That's a unicorn. That's a unicorn policy. I've heard this, that over ten years and over 15 years and all the rest of it. It raises $565 million after you've taken into account the costs of implementing it and that does not cover one month's interest bill.
BRISSENDEN:
So you start small like a lot of these policies.
TREASURER:
Sure and that is fine.
BRISSENDEN:
That's the same path you're doing down, isn't it?
TREASURER:
Sure, but you have got to deal with the Budget and the forward estimates in a Budget. This $100 billion and all rest of it they go on about, they are selling a unicorn to the Australian people. Higher taxes for higher spending, because they're not talking about saving, they're taxes to spending on what they've announced is 20 times what they're saving.
BRISSENDEN:
We've been talking about negative gearing for decades here, we've been around talking about trying to wind that back in some way or other for decades. It's always been a politically charged and very difficult issue.
TREASURER:
It is.
BRISSENDEN:
Labor is offering you a certain detente on this issue at the moment – why not embrace it?
TREASURER:
What they've proposed, particularly on the issue of limiting it to new properties, I think runs the great risk of severely distorting the residential real estate market and l think it will really penalise ordinary mum and dad investors who will now have to compete against people on high incomes with more properties who will bid up the cost of those new properties. The other thing is for everyone else who owns property the minute you put your key in the front door your house turns from a new house to an old house and it's a bit like driving a new car off the lot in terms of what it means for your assets. I don't think they've thought it through. That's not to say the Government won't continue to consider these things but my focus has always been that negative gearing is not the great sin that the Labor Party demonises it with. I think negative gearing gives ordinary wage earning Australians the opportunities to try and get ahead. Two thirds of those who use it have a taxable income of $80,000 or less, 70 per cent just own one property with a tax loss of about less than $10,000. They're not the problem.
BRISSENDEN:
Let's move beyond negative gearing for a moment. Are you going to address bracket creep?
TREASURER:
Where we can make other changes in the tax system we will use any revenue from that to reduce the tax burden, not just on income taxpayers but if we can on companies as well. Last year we introduced a tax cut for small business and we also introduced the instant asset write-off. They were good changes; this Government has delivered $20 billion in tax cuts over the last 2.5 years.
BRISSENDEN:
So, it will be modest?
TREASURER:
You have to work with the scope of revenue you have available and this is not a Government that wants to jack up taxes as the Opposition thinks the plan for growth is tax and spend. The Treasury modelling shows that is a very bad plan and it costs growth.
BRISSENDEN:
Even modest tax cuts are going to require some sort of spending cuts where is that going to happen?
TREASURER:
Two things, it requires changes in the tax system more broadly and where you can fund tax changes, tax cuts, for personal income tax from those areas that what you should use it for. You shouldn't use it for higher spending as others wish to. On the spending side of things I mentioned yesterday $80 billion already we also had billions of savings which were announced in MYEFO.
BRISSENDEN:
$70 billion of new spending? Anyway we won't go back to that.
TREASURER:
$70 billion which included $8 billion on defence and national security, Michael, and $16 billion on infrastructure. Which of those would you have liked us not to do?
BRISSENDEN:
But my point is where are the cuts going to come from; the National Disability Insurance Scheme, from health care, from education?
TREASURER:
The same way we've been doing it for the last 2.5 years, Michael. This is my point, you can't think for a second there is an easy path to continue to get expenditure down. Expenditure as a share of the economy will fall from 25.9 per cent this year, it was 26.2, by the way, when I became Treasurer, 25.9 per cent, we got it back to it that and it will fall to 25.3 by the end of the forward estimates. That is a downward trajectory on spending as a share of the economy. We have $13 billion which the Labor Party opposes in the Parliament. They have announced another $14 billion in new spending on top of that. Tax and spend doesn't grow jobs.
BRISSENDEN:
But you're still not being specific about where your spending is going to come from.
TREASURER:
That's what the Budget is for, Michael. We had the MYEFO statement and there was a lot of specificity in that, in those changes. One change that was in MYEFO, it may have escaped your notice but what we introduced in MYEFO were two important welfare measures, if you haven't entered into a debt management plan with the Commonwealth, the money you owe to the Commonwealth, you won't be allowed to leave the country. The other thing we have said is we won't be writing off those debts after six years as was previously the case. That combined with other integrity measures would have raised around $2.5 billion. So, that was policy announced in December.
BRISSENDEN:
Does that address the $100 million a day we're still spending.
TREASURER:
$2.5 billion I'm not going to sneeze at Michael – you might.
BRISSENDEN:
I'm not sneezing at it.
TREASURER:
I think it was a good change. I think it cracks down on those who aren't paying their welfare debts to the country.
BRISSENDEN:
Not long ago we were in a Budget emergency – a crisis; the fundamentals of that haven't changed, have they?
TREASURER:
The fundamentals of the global economy, the fundamentals of the way revenue is coming in shows that even in those circumstances most of the work to balance the Budget at the moment is being done on the revenue side and that's by average taxpayers having to pay more tax. We are reducing expenditure and that will come down over the next four years and that's a good thing and we need to continue to constrain expenditure and we need to continue to make savings wherever we can. That is exactly what we are doing in this Budget. It's both savings and stopping new expenditure because we believe that the best way to let people get ahead is to have lower taxes. Now, to have lower taxes you have got to have lower spending and that's our plan.
BRISSENDEN:
Ok, Scott Morrison, thank you for joining us.
TREASURER:
Thanks a lot Michael.