NEIL MITCHELL:
Treasurer, good morning.
TREASURER:
Good morning, it’s good to be here.
MITCHELL:
Thanks for coming in. A poll today said that 52 per cent of people support an increase in the GST provided there is a trade-off. Does that increase the chance of it happening?
TREASURER:
Well, what it says is that the Australian people are engaged in this discussion that we are having and they are not falling for the opportunistic sort of scare campaign tactics we are seeing from the Labor Party. The Australian people are intelligent people, they know that last time round when these things were considered there was compensation but I should stress again the Government has no preferred option and is not putting forward any proposal on this at the moment.
MITCHELL:
But if you’ve got majority support, which that poll suggests you have, it must embolden you?
TREASURER:
Well, what it says is that the Australian people aren’t falling for the tactics of the Labor Party. They are engaging with the Government. We are treating the Australian people with respect on this issue and we are engaging with them fully. So, that means the conversation I think is heading in a very mature direction and we will continue to have it.
MITCHELL:
Are you doing your own polling on support for the GST – or preferred options?
TREASURER:
Well, I am a bit disconnected from those sorts of parts of what the Party does and I am sure the Party will do their own thing because that is separated obviously from Government. What I am focussed on is just making sure that we work through these issues with the states and territories because at the end of the day for anything to occur at that sort of level there needs to be the strong recommendation and support of the states and territories.
MITCHELL:
The Victorian Premier has indicated that he doesn’t support it but would if it went to an election – if you went to an election and won. Now, on the polls you would walk in an election.
TREASURER:
Well, that just sounds a bit like having your cake and eating it.
MITCHELL:
Well if you get approval of the people, he won’t block it is what he is saying.
TREASURER:
We’re not looking for people not to block it. The states and territories are the ones who originally brought this matter to the federal Government under the previous leadership and we have modelled in response to that request some scenarios. The states and territories will be significant beneficiaries of any change to our tax mix and I should stress, what we are looking at here is a change to the tax system. A better set of taxes rather than a bigger set of taxes. The states and territories if you want to be a beneficiary you need to be a participant.
MITCHELL:
Ok but let’s work it through though. If there was to be an increase in the GST, and people want some sort of – not just compensation but trade-off; other taxes go. What other taxes could be reviewed?
TREASURER:
I can only really refer you to the history on our side of politics and when this was done by Peter Costello and John Howard taxes, stamp duties on various transactions, income taxes, all of these, wholesale sales taxes, all of that went.
MITCHELL:
There are a few that survived too which we thought would go.
TREASURER:
They did and some of those were state taxes which the states did not follow through on as part of that original arrangement and that is why, I think, this time around we need to be very clear if we are to go down this path about what everyone is going to do, what goes but I want to see…
MITCHELL:
So what would go? What could go from a federal point of view? What could you say, ok, GST is going up that goes, federally.
TREASURER:
What I have been focusing on is actually not consumption taxes, I have been focussing on income taxes and as we said before I am very concerned that if you are on an average wage over the last 15 years you are earning twice as much around that but you are paying almost three times as much income tax and if you are on the average wage next year you will go onto the second highest tax bracket. So, I’m concerned about that and how the personal income tax system is actually holding back Australians throughout their working and saving and investing.
MITCHELL:
So, could there be an increase in the GST and a trade-off by a reduction income tax?
TREASURER:
Well, that is certainly what happened last time when that was looked at. They’re the obvious types of things that you do as part of any package and that is why you have got to work through all these details with the states and territories. I mean I have never said that this is about trying to raise more taxes for more spending. That is not my objective, that is not the Government’s objectives. States will bring their objectives to the table and we have to work together to try and get, I think, a sensible compromise.
MITCHELL:
So, are there any other taxes that you would look at dropping? Something you might like to get rid of?
TREASURER:
At the next meeting of state Treasurers we are looking at a whole range of state and territory taxes and one that often comes up is the insurance levies and that costs Australians around $6 billion a year and that is a state and territory charge, it is a tax on insuring your insurance and we do have issues of under-insurance in this country – that is a fairly straight-forward state and territory levy that could be dealt with but there are many others.
MITCHELL:
Any federal taxes you could trade off?
TREASURER:
Well, we are always concerned about the level of competitiveness of our tax system and corporate taxes and the investment asset write-offs – the instant asset write-offs I should say – I mean we introduced that for companies of turnovers of $2 million or less in the last Budget. If the Budget allowed we would have very much have liked to have gone higher than that. These are the sorts of trade-offs whether it is in corporate taxes, personal income taxes, that you can look at to ensure that you change the tax system. It is not about increasing the tax burden it is about having a better set of taxes.
MITCHELL:
So, can you guarantee us the tax burden will be no higher?
TREASURER:
We are still working through the compromise with the states and territories. That is certainly our objective, that is what we would like to see.
MITCHELL:
Would the federal tax take be no higher?
TREASURER:
Well, the GST is a state tax collected by the federal Government so we are certainly not looking at increasing other taxes, no.
MITCHELL:
That’s a bit disingenuous. It is a state tax but it helps the federal government because it is giving it back to the states. In simple terms, add the GST, increase in GST to what we are paying at the end of the year are we going to be paying more tax overall, less, or the same?
TREASURER:
Well, I can only show you the experience from when John Howard and Peter Costello did it and of course there is a one-off adjustment that has to be made for compensation, that is what happened last time and what is important is that last time we did not see an indexed effect of the increase that was undertaken at that time. So, there is a one-off effect that you have to do with compensation, you do that through the tax scales as well as through the payment system and this is the lived experience of Australia. I think that is why we have seen what we have seen today. People know when this was done before that there was adequate compensation. If anything there was overcompensation – that is what the history tells us and there were big changes to the tax system. Income tax levels were cut, and other taxes were cut right across the board.
MITCHELL:
Will you spend less?
TREASURER:
Well, certainly, the federal Government is looking to control its expenditure. We are currently at GFC levels of spending – 25.9 per cent of GDP. Over the Budget and Forwards that is projected to decline and we certainly want to see that decline.
MITCHELL:
You’re not seriously looking at death duties, are you?
TREASURER:
Well, I said yesterday that we are not ruling anything in or ruling anything out and I also haven’t ruled out taxing space travel.
MITCHELL:
It’s been floated seriously and it will terrify people the idea of death duties. Can’t we just say no?
TREASURER:
The second we go down that path, Neil, then the Government has made a clear commitment that we are not going to get into that game, we’re not going to get into that old politics game, we are having a very good debate, I think, with the Australian people, we are considering a whole raft of very genuine options and we are going to continue to do that and treat the Australia people, I think, with the appropriate level of respect.
MITCHELL:
Terry, hello, go ahead, please.
CALLER: Good morning Mr Morrison, one of your few great Australians– how are self-funded retirees going to be covered in this?
TREASURER:
Well, the same way I think these things were looked at last time, Terry. Again, I stress, we haven’t got to any point of preferred option or model. The Commonwealth always has the option to simply deal with the taxes in its level of responsibility. If the states and territories wish to see the GST increase they will make that recommendation at the end of our process.
MITCHELL:
Can you, if the GST goes up, and you are leading that decision, effectively, if the GST goes up and the states don’t lower their state taxes what are you going to do about it? We could be sitting there were you put the GST and say well it is up to the states to reduce their taxes but they don’t and we are stuck in the middle.
TREASURER:
It’s not just about tax. There are the tax system changes we are talking about with the states and territories. There is the Harper competition reforms which is all about giving Australians greater choice and better spending right across all levels of governments. That is why I have never been a fan of just giving the states a bucket of money to just keep ploughing into their current level of spending. We want better spending, we want more efficient spending and that is what the Harper reforms actually do [inaudible]. The Tax system is just playing one part in that process and so to get back to Terry’s question on self-funded retirees we know that they are a key group which aren’t in the payment system, predominantly – that is why they are self-funded retirees – and they are not necessarily in the tax system in the same way that others are. So, that, if you were to go down that path you would want to have a very specific set of measures which dealt with the situation of self-funded retirees – particularly those on modest incomes.
MITCHELL:
The word fairness keeps coming up – define it.
TREASURER:
It’s a fair go – that’s what it is. It’s, in this country, it isn’t about having equal incomes for everybody but equal opportunities for everybody.
MITCHELL:
Even the rich?
TREASURER:
Well, why don’t they deserve a fair go?
MITCHELL:
Because you seem to be targeting them in various ways – or talking about targeting them; superannuation.
TREASURER:
Well, that is what a fair go is all about. Now, people have had equal opportunities in this country and they have done well and good for them but if we are looking at superannuation in particular we have got to think of why do you have tax incentives for superannuation? It is a simple answer and that is so people can be independent in their retirement. Now, there are some Australians who won’t need any help to get to that position. There are some Australians who will need that sort of tax support to ensure they can get to that level. Sadly, there are some Australians who will always be dependent on a pension and that is why we have that system for over four million Australians and it costs us over $40 billion a year.
MITCHELL:
The changes to superannuation, as discussed, as suggested, seem to me to target something less than rich though?
TREASURER:
Well, we haven’t put forward any specific proposals on this yet, Neil, and that is why we’re still working through those issues.
MITCHELL:
That’s creating an atmosphere of nervousness at the moment.
TREASURER:
I think it is important that we get to a position on it but I have set out some very clear principles, particularly around stability and certainty on superannuation. I think it is very important that when we consider things in the retirement phase that we understand that changes in that area either in fact or in perception or practice have a retrospective element to it and I am no fan of that.
MITCHELL:
We’ll take a break, come back with more from Scott Morrison – specifically the NDIS.
**advertisement break**
MITCHELL:
Federal Treasurer, Scott Morrison is with me. Dennis, go ahead, please.
CALLER: Good morning and good morning Mr Morrison.
TREASURER:
G’day Dennis.
CALLER: For every Australian man, woman, child and baby the Australian Government collects in total over $15,000 per head – how come we can’t, or the Government can’t run the country on that?
TREASURER:
We inherited a pretty high level of structural spending, Dennis, and this is what we are trying to get under control. We have already brought savings through to the Budget of over $60 billion just in the last two years. If we had kept on the same trajectory of spending that the previous government had us on the Budget would be almost $80 billion worse off at the moment. So, we have got to get that spending under control. That is why I have always, since coming to the job, and will always focus on to get the Budget under control you have got to get spending under control. On the revenue side of things the objective is to grow the economy – that is how you lift revenues. You don’t do it by increasing taxes, that is how Labor governments do things. What we are focussed on is controlling spending and I think we have made a very strong start to that and we need to continue on in controlling that expenditure.
MITCHELL:
Thanks Dennis, a strong start to controlling expenditure. Maybe Tony Abbott and Joe Hockey didn’t do everything wrong – did they?
TREASURER:
Well, no one suggested they did.
MITCHELL:
You got rid of them.
TREASURER:
Well, over $60 billion in savings in our first two years and some of those were the ones I talked about when I was Social Services Minister. You do have to control expenditure. We are not having a discussion about the tax system to raise taxes to balance the Budget – that is not what it is about. It is to grow the economy.
MITCHELL:
You gave a speech last night and mentioned the National Disability Insurance Scheme. You say it is heading towards $32 billion – can we afford it?
TREASURER:
Well, there is the Medicare Levy increase of half a per cent – that’s not going to pay for that and we have got a short-fall of about $5 billion at the start we’re now blowing out to around $7.6 billion or thereabouts over that ten year period. So, that means across the welfare system, across spending more generally we are going to have to target things so we can ensure that those…
MITCHELL:
What do you mean by target?
TREASURER:
Well, better address eligibility issues and we have done that in a range of areas. We’ve got - what it is about is ensuring that the welfare system is fit for purpose and I will give you an example…
MITCHELL:
But addressing eligibility issues means taking it away from some people doesn’t it?
TREASURER:
It means making sure it does what it is supposed to do. Let me give you an example, Family Tax Benefit package which is in the Senate at the moment and which the Labor Party is not supporting, there is the Family Tax Benefit supplement which was introduced over a decade ago, it was introduced, first as a balancing item for people who had misestimated their annual income for receiving a family tax benefit payment. So, it was there as a balancing item. Now, under the Labor Government that got entrenched into an annual welfare payment – a sort of Christmas in July bonus payment for the Family Tax Benefit. Now, in 2018/19 there won’t be the income estimation method. It is a redundant payment and we have suggested actually getting rid of those supplements, increasing the base level of family tax benefit payments and putting the savings into childcare
MITCHELL:
What is the net gain there?
TREASURER:
Well, it is several hundred million dollars.
MITCHELL:
To the Budget?
TREASURER:
It is several hundred million to the Budget but it is also enabling us to do the childcare reforms and that is why we tied them together. That is what controlling expenditure means.
MITCHELL:
You have committed to the NDIS – you’re not backing away?
TREASURER:
Of course we’re not. No absolutely.
MITCHELL:
Ok, so how do you pay for it?
TREASURER:
The NDIS should be the first dollar we spend in social services.
MITCHELL:
How do you pay for it?
TREASURER:
By controlling expenditure and by ensuring that we are driving revenue up by growing the economy. That is why everything we are doing, whether it is on the Free Trade Agreements or whether it is on what we are doing with the Harper Reforms or the tax system changes – all of this is designed to grow the economy. That is the way you actually lift revenue. Australia has an earnings problem. We need to earn more as a country and that is how you deal with revenue issues.
MITCHELL:
But the modelling reported today says that on the growth expectations we are looking at about 3 per cent optimistically – you are going to have a $5 billion deficit every year. We are heading for an NDIS of $32 billion how are you going to – where are the smoke and mirrors?
TREASURER:
We don’t underestimate the Budget task that is why we constantly are pursuing savings in the Senate and the Labor Party currently has over $55 billion worth of commitments that are unaccounted for by their own tax and savings proposals. We understand you need to get that under control. The MYEFO will be out in December, that will give an update on where the Budget is at. We have had some additional commitments since the Budget like the extra spending on the refugee intake and some infrastructure spending. We will be seeking to make that up in the course of MYEFO and it is just a task you need to apply yourself to everyday, Neil.
MITCHELL:
So, can you save your way out of it, or cut your way out of it or will you have to tax your way out of it? Which is it?
TREASURER:
Well, you have missed the key ingredient and that is to grow your economy.
MITCHELL:
We’re growing at less than 3 per cent and nobody is predicting anything else with the world economy. What are you telling me, we’re going to grow it, we are going to suddenly get up to about 8 per cent are we?
TREASURER:
2.3 per cent was the average year growth last year for our economy.
MITCHELL:
And the year before?
TREASURER:
And 1 per cent was the growth for Canada – 1 per cent. Now, we are similar economies, they grew at 1 we grew at 2.3. Glenn Stevens said that the headwinds we are facing in the economy at the moment are the strongest we are likely to see in this environment and we are growing at 2.3 and we will look to get ourselves back to about 3 per cent, which is just under the trend. Now, that is where we need to get to. The way we deal with our Budget overtime on the revenue side is to grow the economy and that is why all of these things we are talking about; tax system changes, all of these things are about growing the economy.
MITCHELL:
So, are you telling me we have a growth rate of 3 per cent, everything is hunky dory and all the money comes in that we need?
TREASURER:
Well, eventually and you need to be slightly above that.
MITCHELL:
How far above?
TREASURER:
Well, the long run average is a bit higher than that. Remember the long run average includes the commodities boom that we had in this country. So, it is a process of growing your economy, growing revenues and controlling expenditure and that will deliver a Budget balance over the cycle.
MITCHELL:
Is there an increase cost of security now?
TREASURER:
Well, there already has been.
MITCHELL:
But more given what has happened in Paris?
TREASURER:
Well, we all look at these things constantly through the proper process and take the advice but remember it was this Government that acted very quickly to boost our resources into our national security agencies, border agencies, all of which have been run down and we acted very quickly to do that. The first package was over $600 million.
MITCHELL:
If there is a request for increased military involvement by Australians can it cost a lot? Couldn’t we look at some sort of levy there?
TREASURER:
Look, I am not going to get ahead of that debate, Neil, any request that would be made of the Australian Government would be considered in the right process. We already have the second largest deployment when it comes to supporting the global efforts there, the Coalition efforts in the Middle East and any further action there is really going to be I think first the parameters set by countries other than Australia and then we would consider our involvement of that in that context.
MITCHELL:
What does that mean? Could there be a levy or not?
TREASURER:
Well, Neil, why would I even respond to that? I mean you’re asking me…
MITCHELL:
Because we are the ones…
TREASURER:
I don’t think I have to go down that sort of hypothetical path.
MITCHELL:
We are discussing the financial hole we are in and trying to dig our way out of. The chances are that could get worse because of the international situation. How do we pay for it if we have to?
TREASURER:
Well, Neil, what I have said is our plan is to grow the economy, control expenditure, to get the Budget back in a strong position. Any consideration of matter relating to national security or any proposal we would consider from our allies in the Coalition efforts in the Middle East would have to be considered in that context. So, I am not going to jump ahead of that and get into the issues you have raised. I just think it is way too premature.
MITCHELL:
What did you think of the words of the Grand Mufti yesterday when he was effectively blaming the victims in my view?
TREASURER:
Look, I was very disappointed and I support what Peter Dutton has said today and I would encourage him to, I think, come out and clarify what his statement said. I was very disappointed for Australian Muslims yesterday. I though Australian Muslims were let down by the Mufti yesterday and the Imams Council who I understand that statement was issued on behalf of. I think we’ve got into a much more mature discussion about these very complicated issues and I think Australians Muslims would have been disappointed in those comments, certainly those who I have close relationships with were and I really urge him to listen to his own community on this and to reflect their views.
MITCHELL:
The first family of refugees from Syria arrived today, I think. I feel for them walking into a tense situation in this country. Can you as a former Minister in the area, be confident that these people, not just this family but the 12,000 refugees have been properly screened.
TREASURER:
I can be because we have a very long history of doing this well. There is a big difference between people who are pouring across your borders illegally as was occurring in this country only two years ago – our sea borders on those occasions – and what is happening in Europe where you have hundreds of thousands of people just moving across the continent. That is not happening in this country and it is not happening in this country because this Government took decisive action and ended that. Now, the process we have to select people for this 12,000 has not changed since it was first announced under the former Prime Minister. It is the same set of parameters. We are focusing on those persecuted minorities and that obviously includes a very large Christian component. In fact the majority, I would expect, and that is because it is those communities who are at most long term risk in the Middle East. Christians will never be able to go back to some of these countries for generations – for generations – and we are offering permanent resettlement. So, those families who are coming, I think they will get the warmest of welcomes, I think they will get the best settlement services in the world and they will be thoroughly screened and I think they will make very good Australians.
MITCHELL:
The former Prime Minister, I talked to Tony Abbott in a special programme on Saturday night. He has certainly been out and about doing interviews, he is writing in The Australian today. Is that helpful?
TREASURER:
He is perfectly at liberty to do that.
MITCHELL:
I know he is. Is it helpful?
TREASURER:
Tony brings - he continues to have, I mean, his experience has not changed – he has a lot to offer to the country, he has offered a lot to the country already, he has made an extraordinary contribution both to our party…
MITCHELL:
He told me the death cult is coming to get all of us – do you agree with that?
TREASURER:
There is no doubt that its continued presence in the Middle East will continue to offer some inducement to those all around the world to engage in the sort of terrible acts that we saw in Paris. That is why our first responsibility is to ensure that Australia is as safe and secure as it possibly can be. That is why we increased resources to our security and intelligence agencies. That is why we have got, I think, the strongest border protection of anywhere, arguably, in the world to ensure that we can keep Australians as safe as possible in what is a very complex environment.
MITCHELL:
Can I ask you about the little Australian flag you are wearing on your lapel – little badge – where is that from?
TREASURER:
That was given to me by a supporter in my electorate. I wear it regularly. I have been wearing it for years.
MITCHELL:
Oh ok. Is it possible, you might not be able to answer this on the spot – I doubt you could? Is it possible to assess what it costs to run government? I mean, as succinct from spending on welfare or on other such things; what it costs to pay politicians, run Parliament, run the public service – in other words the cost of administration.
TREASURER:
Yeah, it’s all in the Budget papers there at least every year.
MITCHELL:
Individually?
TREASURER:
The full Budget paper number 2 goes through all the measures but specifically for each Budget there is a full breakdown of the cost of running the Government – knock yourself out. It’s all there. I know it costs us $440 billion to run the country in total – that is everything.
MITCHELL:
Do you know how much of that is the cost of running government?
TREASURER:
It’s all in the Budget, Neil.
MITCHELL:
No, I wouldn’t expect you to know.
TREASURER:
It’s all there, you can look it up.
MITCHELL:
Thank you very much. Thank you for coming in. Just a silly question – are you into yoga or any health therapies, natural therapies? Tai Chi?
TREASURER:
I’m not, I suspect I would get tied up in knots pretty quick.
MITCHELL:
What about acupuncture?
TREASURER:
No, I’ve never done that.
MITCHELL:
Vitamins?
TREASURER:
Occasionally.
MITCHELL:
Rolfing?
TREASURER:
I don’t even know what that is.
MITCHELL:
Neither do I.
TREASURER:
I have got no idea what that is. I’m addicted to Indian curries, that is probably my greatest sin.
MITCHELL:
What do they do? No, I don’t want to know. What is your favourite curry?
TREASURER:
I like a white lamb curry and that is my daughters favourite too. Every Saturday night in my house, I do this with the kids and Jen and we have a great old night and then watch a movie together.
MITCHELL:
Curry and lager?
TREASURER:
Well, I certainly have the lager – my six year old doesn’t.
MITCHELL:
You have a six year old into curry?
TREASURER:
Yeah she loves it. It took her awhile to warm up to it, the eight year old has always liked them, but my youngest daughter – she loves Melbourne by the way, she has been here a couple of times with us and at six years old she told me she wanted to open a restaurant in Melbourne.
MITCHELL:
Does she cook for you?
TREASURER:
Yeah, she has a go. She sort of mirrors what I am doing. I don’t know if we’d eat it yet but she certainly has fun doing it.
MITCHELL:
Because you cooked the curry along with Annabel Crabb, you were cooking the curries?
TREASURER:
Yeah. I’ve been doing it. I took it up early this year, it’s just one of those things which clears your head and is good to do with the family.
MITCHELL:
I don’t think it is in the category of health therapies which are being…
TREASURER:
No, the ghee that goes into the base I don’t think is the best for your health but it tastes good.
MITCHELL:
Well, come back to issues. Scott Morrison, thanks for coming in.
TREASURER:
Thanks, Neil.