PETER SWITZER, PRESENTER:
Welcome to the programme, Treasurer.
TREASURER:
G’day Peter, it is good to be with you.
SWITZER:
Now, some of your right wing commentators are saying, ok the political rebound has been very good for the Turnbull Government but what has Malcolm Turnbull and his Treasurer done for the economy so far? So, in a nutshell, what have you done?
TREASURER:
Well, I don’t tend to get distracted by the commentators on these things but what we are very focussed on is bringing together all the strands of our economic policy, whether it is our trade agreements, whether it is trying to ensure a better tax system – there has certainly been a lot of energy that has been going into that area. Our response to the Financial System Inquiry of a few months ago has been very important in sending the right messages and in strengthening that system. Today, we have responded to the Harper Inquiry – some 56 recommendations. We haven’t rejected any of those, in fact we are moving forward on 44 of those 56 and doing a bit more work on the balance. All of this is about driving jobs and growth but it is ensuring that I think those in the business sector and those out there in the Australian community can have greater confidence in the Government’s economic plan. We know from the Westpac Melbourne Institute index that more Australians today are confident in the economy than they are not confident – we have more optimists than pessimists and you and I both know that is important fuel for the economy is confidence.
SWITZER:
Exactly right and that is why I would often say that even if the policy initiative so far haven’t been all that numerous the fact that confidence is rebounding is exactly what good policy would do. However, today your own Treasury came out with a downgrade of economic forecasts. Now, Scott, I am out there trying to build this economy up and you guys are now bringing us down. How dare you let your Treasury downgrade their forecasts?
TREASURER:
Well, that is not how I would describe it and as you would know this is a technical adjustment that they are looking at their methodology and how it is implementing on what goes forward for what we put in MYEFO. What will be in MYEFO will be the forecasts and the projections out over the Budget and forward estimates and one of the criticisms that has been made I think in recent times but was certainly made under the previous Government is that people didn’t believe those forecasts. I mean the previous government was forecasting growth rates which no one believed to prop up numbers at the back end of the forward estimates. Now, that is not the sort of show I intend to run. I intend to be fair dinkum about what the position is but was is true is in each year we are seeing a lift in growth, what we are seeing is growth increase from last year, to this year to next year. That is what is important and we need to keep that growth growing. Now, there is no doubt we are facing some of the stiffest headwinds post the mining boom that Glen Stevens has articulated that but despite that last year’s year average growth – 2.3 per cent you go to year in growth in Canada of around 1 per cent. We are doing exceptionally well despite the difficult circumstances we have, but the economy is showing those signs of improvement and it is diversifying in transitioning which is the key.
SWITZER:
Now, when I taught you many years ago and Paul Keating was Treasurer, I often would make the point that someone like Keating would often give us a lower economic growth number and then when the Budget actually came around and the economy was growing a little faster than he promised the Budget looked better. Don’t tell me you are using that kind of tactics, Scott?
TREASURER:
We’re just trying to be fair dinkum about it. We are trying to be fair dinkum because Australians are fair dinkum about the challenges that they are facing. Australians know that there is uncertainty out there, they know the economy has got to transition and they know if they stand still and do nothing – well, nothing will result, in fact they can go backwards. So, what we are doing is we are trying to back Australians out there working and saving and investing and doing all the things they need to do to try and put themselves in a better positions and we need the policy settings around them to achieve that. When you see mining investment drop from 8 per cent of GDP to 3 per cent – that is a big knock on the economy and what has been happening with commodity prices. When I look out to the next five or 10 years one of the most important things we have to drive is productivity growth. Now, during the mining boom years we saw multi factor productivity drop right off from about 1.5 per cent down to 0.4 per cent in the non-mining sector. Now, we need to see that lift in the next ten years because we won’t have commodity prices and things like that to paper over any failure to achieve those goals. So, that is why the response of the Harper Review today, I think, is really important. It shows that we are going to work closely with the state and territory governments where most of the microeconomic reform has to take place over the next five to ten years and particularly in areas like the human services, social services area which, as you know, is double digits in terms of the employment of our economy and has been growing as an employment sector well above the national average.
SWITZER:
Are you having difficulties dealing with the effects test, basically the battle between big business and small business?
TREASURER:
The problem is people see it as a battle between big business and small business but, news flash, competition is about the customer – not about the business – and it is all about the number of choices that customers have, consumers have. In any economy we put the consumer at the top of the pile then I think you really are going to gear your policies in the right way. So, what I am concerned about, and it has been seen in these very binary terms and over the next few months, in fact in the next two weeks, we will put out a discussion paper which narrows this down to a couple of very specific proposals in how we can deal with the impact of the effects test or not going down that path. What I would say is section 46 is not working the way it is currently structured, it is not doing the job we would like it to do and we need to land at a better solution and I believe we will do that and we will have a firm decision in March of next year.
SWITZER:
Ok, it’s courageous and a former Treasurer who I know you admire – Peter Costello – took it on as tax reform. You are talking about GST – that can spook people, it can undermine confidence. Does it worry you that all the talk and what the media and your rivals might do with it could actually undermine business and consumer confidence?
TREASURER:
Well, there are always lots of reasons not to go ahead and make the changes in your economy that is going to leave people better off. I mean there will be those who try and talk you out of it and run scare campaigns and I think take a very opportunist approach in all of this and obviously we are seeing that from the Opposition, but what I have been encouraged by is the way that Malcolm and I have been seeing to run this debate, is to let people have their say. Let’s not rule things in or rule things out and play the gotcha game. I mean there are lots of good ideas here and they are all on the table but they are not always going to be on the table forever and we will actually have to bring this down at some point. In the meantime what I am appreciating is the very honest feedback and you know if you got into that rule-in rule out process before, then frankly you would end up with nothing on the table and nothing to change. The taxpayer and the Australian who is out there trying to get a job would be short-changed.
SWITZER:
One of the things my viewers might be worried about is the suggestions that there would be new super tax changes and rule changes. When are you going to make a decision about that? Is it going to be a pre-election thing or a post-election thing?
TREASURER:
Any changes we make on things as significant as this obviously you would take to the Australian people. So, we are looking to work through these issues before the next election. We have been very clear about that. One of the things that Australians, I think, are getting about this though is that it is not just one change here or one change there. It is about a package of changes that we are trying to arrive at and working with the states and territories. It is not just about federal taxes, there are states and territory taxes too that come into all of this and they know that this is how it worked last time. I mean when Peter Costello did this with John Howard 15 years ago, it was a package of changes, there were adjustments in social security payments to ensure that people who were vulnerable were not worse off and there were changes to the income tax system which did the same thing and then went further than that to ensure that people weren’t worse off – in fact were a lot better off. It’s the personal income tax issues that have really got me quite focussed. Next year, if you are on the average wage in this country you will go onto the second highest tax bracket. That is not a tax system that is backing people to work, save and invest. So, we need to ensure that we are getting reductions in taxes and to do that you need a change in how you put all your taxes together and that is what we are having an honest conversation about. A better tax system helps grow the economy. We don’t need to increase any taxes to balance the Budget. That is what Labor does. We can change the tax system to support growth and jobs and that is the only reason we are having this discussion.
SWITZER:
One of the things I taught you many years ago is that a falling dollar can be good for economic growth. What forecasts are you guys working off for the Aussie dollar across, say 2016?
TREASURER:
I will leave that to forecasters – I am not a forecaster or a commentator. It is my job to actually put in place policies to grow the economy and we have these stabilisers that are there and these things that have adjustments which [inaudible] Australian businesses in a more competitive position. So you are better placed to commentate on those things, I think, Peter, as there are many other economists out there who will give people a view. Obviously, we want to see our exporters in the most competitive position they can be in. Our tourism industry, our international education sector, these are the real growth sectors of our economy and these are the areas where we are seeing the growth in employment which is offsetting changes in other parts of the economy. We are seeing this transition in our economy already take place. Our message to Australians, business and others, is as Australians we are not going to be intimidated out of our prosperity. We are not going to be intimidated by the fact that yeah, there are changes in global conditions and there is volatility there and there is also structural changes happening at home. Australians back themselves to get through this and we back them to get through it as well and we will put the right policy settings in place to support that.
SWITZER:
Thanks for joining us, Scott.
TREASURER:
Good to be with you Peter. And remember you will be to blame, as my teacher, taught me everything I know about economics. So, I appreciate all of that many years ago and it is good to catch up with you.
SWITZER:
Same here, mate. Thanks for joining us. There is a bit of pressure on me now, isn’t there? A real bit of pressure.