NEIL MITCHELL:
Federal Treasurer Scott Morrison, good morning.
TREASURER:
Good morning Neil and happy new year to you and your listeners.
MITCHELL:
Thank you. Treasurer, oil $30 a barrel, Iran is talking today about releasing more. Should petrol prices drop further in Australia?
TREASURER:
I think all Australians would expect that if the global oil price is going down then petrol prices should also and they will be watching that. We have already seen I think quite a significant fall in petrol prices. People would have noticed that I am sure over the break. That is welcome and that keeps the cost base down for businesses as well. That is the other side of the coin.
MITCHELL:
Are they fair enough at the moment or haven’t they gone down enough?
TREASURER:
Well we have seen prices come down quite a way and if there are further developments on that front you would expect the adjustments would be made at the bowser.
MITCHELL:
Do you think we could go under $1?
TREASURER:
I am not a speculator on these things but we will see what plays out in terms of the global price and how that flows through to prices at the pump here.
MITCHELL:
I know we have not got long, there are a few things I want to get through. Have you started work on the budget yet?
TREASURER:
Of course.
MITCHELL:
So that means there won’t be an early election pre-budget?
TREASURER:
I am planning to deliver a budget in May as always which is the time and the Prime Minister has made it pretty clear he has not had any change of heart in terms of what he said about the timing of an election and that is to be expected. We are just getting on with the job of governing Neil, that’s what people would expect, particularly when there is a bit of global volatility around which I think everybody is seeing and our response to that is to get on with the stable job of government.
MITCHELL:
It would be pretty disruptive wouldn’t it to have an election before the budget because you couldn’t work on it, and immediately after for that matter. But how do you strike the balance? You come out of this, that means theoretically you need an election budget if you haven’t been to an election but at the same time economically you need a tough budget don’t you?
TREASURER:
We need a budget that is right for jobs and growth in this country…
MITCHELL:
So that is tough?
TREASURER:
Well it will be what is right for jobs and growth and when we are talking about changes to the tax system like you and I have spoken about many times, you have got to have a mix of taxes that are going to promote both growth and jobs. Now there are proposals around today which have been put forward by the Financial Services Council and they have modelling out there that shows if you change the tax mix you can improve growth in the economy. This is out point…
MITCHELL:
Does that appeal to you by the way? They are talking about a 15% GST and 22% company tax rate.
TREASURER:
Well there are all sorts of permutations around this but the point is if you can have a tax system that treads more softly on people who are working, saving and investing, who are already out there doing it, then that can promote growth in the economy and support jobs and that is why you do it and that is why we are focused on having this discussion and getting the various options in place. There is quite a bit of time over the course of this year to an election and we will continue to work those things through with the Australian people. We will not be rushed into things. We will just go through the sober process of getting this right.
MITCHELL:
Before an election?
TREASURER:
Of course, any changes we would make to the tax system would be put to the Australian people.
MITCHELL:
Would you agree the budget needs to cut spending?
TREASURER:
If you look back over the last 30 years the only time we have really produced surpluses was when expenditure to GDP has been at 25% or thereabouts of GDP or lower. In the statement I released just before Christmas we will get that down to about 25.3% over the course of the next few years. Now you have got to go further though beyond that period because if you want to have a surplus in this country and you want to have a tax revenue that is not punishing Australians then that is the sort of level of expenditure – the size of government you have to go towards. Now we are very committed to trying to continue to keep expenditure under control and to grow the economy at the same time. That is how you bring the budget into balance. We have not eased off one inch in terms of getting expenditure under control but we are realistic about what is happening in the global environment. And it is a mugs game to be out there speculating about what is going to happen with these various parameters but what we can control more than anything else is how much we spend and that is what we are focused on.
MITCHELL:
So that means we are looking at a tough budget?
TREASURER:
We look at a sensible budget for the economic times which we find ourselves in and that has to focus on jobs and growth. Now we have had over 300,000 jobs created in 2015. That was a stunning result, a great result for those companies who were able to put those people on and the people able to get those jobs and youth unemployment fell again. We have got unemployment overall at 5.8% which is still too high but for successive months now it has been below 6% and that is welcome.
MITCHELL:
But you were telling me last year that growth in the economy would help to pay the bills…
TREASURER:
Yes.
MITCHELL:
The growth predictions are going down aren’t they? You can’t be expecting the same growth now?
TREASURER:
Well we didn’t. In the statement before Christmas we revised our growth figures and that was to be more realistic in terms of what we were seeing in the global outlook and we have seen that out there. We have got issues in China but our forecast on China is the same that has been put forward by the OECD, the World Bank, the IMF, it is consistent with all those outlooks. But we are seeing much stronger performance in the US and that is to be welcomed.
MITCHELL:
So are you going to revise your estimate of when you get to surplus?
TREASURER:
Well that will be updated at the Budget. But my point about expenditure is this – the surplus will occur when obviously expenditure is less than revenue. But what you have to do is focus on getting that expenditure figure down…
MITCHELL:
So no timetable on it?
TREASURER:
There is a figure in the MYEFO of 2021 but that is not a forecast, that is just if everything stays the same and there is no change to all the parameters then that is what you would expect to happen but as we know, particularly in this global environment, things change a lot. What we can focus on, which we can influence, is our level of expenditure. It is currently 25.9% of GDP, we are going to get that down to 25.3% over the budget and forward estimates but there is more work that has to be done on that to get it to a level where you know you can achieve structural, sustainable budget surpluses.
MITCHELL:
A number of experts have said on the weekend there is a risk of Australia going into recession this year, is that a risk?
TREASURER:
I don’t think that is the balance of commentary which is out there. I think that is quite alarmist…
MITCHELL:
What is your view?
TREASURER:
Well that’s not my view and I think the fundamentals of the Australian domestic economy are very strong. As I said – employment growth with over 300,000 people getting into work, more than 430,000 since the last election, youth unemployment lower than it was at the last election…
MITCHELL:
Income growth said to be the lowest in 50 years. Income growth – that’s where we survive.
TREASURER:
And this is the point. This is why you have got to grow the economy, this is why your policies have to focus on jobs and growth, not on hairshirt economics. You have got to focus on ensuring you are getting people into jobs and the economy moving and that’s what the innovation statement was about…
MITCHELL:
But how do you grow the economy when the stock market is volatile? You mentioned China, you have got to say it is a very tough time at the moment.
TREASURER:
The global situation is volatile and Australians understand that but one of the things that is positively occurring in our economy is we are transitioning well. We are transitioning from the heavily dependent mining resources base to a more diversified services economy, particularly in Melbourne but also Sydney and Brisbane. We are seeing those city economies doing much, much better under the services economy transition we are seeing, Other economies are transitioning too Neil. You have China going through their transition which is a less optimistic outlook but we are still talking about economic growth approaching 7% in China and in the US we are seeing things really start to improve. Let’s not forget the US economy is massive and we are heavily tapped into it.
MITCHELL:
So what’s your advice for people as they see the stock market going through this, there is money being wiped off their superannuation, they are seeing income growth could be the lowest in 50 years. They are feeling a bit glum about everything. I remember talking to Joe Hockey at one stage last year and he said ‘be upbeat, it is all going to pass’, do you agree with that?
TREASURER:
I think people should always be sensible and rational. I don’t think they should jump to conclusions and jump here and there on every report and every speculation, every overstated report. I think people are far more practical than that, they are far more sensible than that.
MITCHELL:
Yeah the stock market is not a report though, that is the market speaking…
TREASURER:
But it moves every day as you know Neil. These markets are volatile, particularly when they are trying to adjust with what is happening in China. A lot of that has to do with how the Chinese Government is dealing with their currency and you have also had a lift in the fed rate in the US which the world is adjusting to as well…
MITCHELL:
So we have a bright outlook do we, in Australia?
TREASURER:
Domestically I think our outlook is positive and that is backed up in the employment figures. Now we have adjusted our forecasts I think to be far more realistic but it is seeing economic growth improve over the budget and the forward estimates.
MITCHELL:
Treasurer if I may just on a few other quick things, I know you need to go - foreign banks. It is reported in the Financial Review today eight foreign banks in Australia with a revenue of $9 billion paid no tax. Is that fair?
TREASURER:
I find this very frustrating. We introduced the laws just before Christmas which the Labor Party voted against which will enable us to get much tougher on multinational taxes including those foreign banks. Now Kelly O’Dwyer who you and your listeners know well is leading the charge on that and I am sure she would be happy to come on the program and talk about the things she will be looking at this year. But we have that new legislation in place which was opposed by the Labor Party, we got it through with the Greens which means we can now put people into these companies and start ensuring they pay the tax that they should be paying. That is a big goal for us this year.
MITCHELL:
The other thing just quickly, eight properties sold under the foreign investment rules including a $6 million dollar mansion in Mount Waverley. Is there any penalty for those people other than having to sell them?
TREASURER:
Well there can be depending on the nature of the breach, but you have to walk the talk on this. We do have strong foreign investment rules in this country and more importantly we apply them – whether on residential real estate or agricultural land and the thresholds we changed there on review or on the really big purchase like the Kidman property where last year I said no. I am very pleased to see there are a number of Australian interests now looking to see if they can get a piece of that acquisition. So we have strong foreign investment rules in this country and more importantly this government enforces them.
MITCHELL:
Thank you so much for your time and all the best for the year.
TREASURER:
Thanks a lot Neil, good to be with you. Talk to you again soon.