RAY HADLEY:
The Treasurer was supposed to be with us not quite an hour ago but 50 minutes ago but he has been caught in Sydney’s horrendous traffic.
TREASURER:
From all of us who live in The Shire we are pretty used to it but today was a little worse than normal so apologies for being a little later in the day.
HADLEY:
Want me to ring Duncan Gay for you and get some sort of clear…
TREASURER:
Don’t worry, I talk to Duncan about the F6 every now and then – quite regularly actually. So do our local state member Eleni Petinos and Mark Speakman.
HADLEY:
So, people listening in Canberra at the moment, people listening in rural parts of Australia and they sling off at me all the time. I mean Brisbane have had a chaotic morning, north of Brisbane, and they get some problems on that corridor regularly and coming up from the Gold Coast as well. I would think that coming from where you are coming to here would normally take me, not at peak hour, but would take me 30-35 minutes.
TREASURER:
Yeah, 30 – 40.
HADLEY:
Ok, so what has it taken you this morning?
TREASURER:
Two hours – I could have driven to Katoomba this morning.
HADLEY:
No, you could have got, I tell you where you could have got, ok, you could have got to Gerringong because I did it in that on Saturday.
TREASURER:
Oh yeah, you’d get way past Gerringong, you’d probably get to Shoalhaven.
HADLEY:
Yeah, down to Nowra and you would have gone past the Blue Mountains, you would have gone to Lithgow because I can get to Bathurst in about 2 hour and 25 minutes obeying the speed limits.
TREASURER:
I am sure.
HADLEY:
Gee, we have got a lot of stuff to talk about. You want the Senate to pass your Budget measures as soon as possible. The Australian is reporting you are preparing a blitz – that is what they call it. This includes passing the company tax cuts in full which will cost more than $48 billion. Parliament resumes on August 30 and obviously Nick Xenophon and Pauline Hanson are now critical, along with David Leyonhjelm who has come from nowhere to grab that lost Senate seat in New South Wales.
TREASURER:
Bob Day and Derryn.
HADLEY:
Well, Day tends to vote with you on most matters anyway. Derryn Hinch, and I went through them last week when they named them on Wednesday or Thursday – the AEC – and there are some wildcards there. You can’t predict how they go. Jacqui Lambie is another but certainly Derryn Hinch, you don’t know, I mean he wants to out paedophiles in jail for a lot longer, which I agree with, but he wants to ban live exports and he wants to ban greyhound racing as well. It is a strange old concoction of Senators you are dealing with.
TREASURER:
Well, a lot of them are new Senators. They are coming in and they will be spending a lot of time coming up to speed on all the measures and information and that is where we are being very patient. What I have simply said is we took a whole bunch of issues and proposals to the election and we will present those to the Parliament. I mean Nick Xenophon puts it this way, he says they have a mandate to present these to the Parliament and we do and we will but you will obviously then have to work that through the Parliament. Now, on the Budget itself, we have to get the Budget back into balance. We have made it very clear that we have a path to do that and that requires passing some $40 billion worth of savings and other revenue measures. Now, we will have to take all of those through the Parliament but we have to all understand this. That every time we don’t pass a savings measure that makes it harder and harder to retain our triple a credit rating to ensure that we don’t see the further impacts of that flow on to bank rates and the other impacts on households. It is important that we get the Budget back into black and we have a joint responsibility on that. I mean there can’t be an all care, no responsibility approach to it. I mean the facts of the Senate are that if Labor and the Greens are blocking government legislation – so, savings proposals or other revenue proposals – then it only takes the Xenophon Party or the One Nation Party to side with Labor and the Greens and it is blocked. So, it is no longer a decision about whether you choose to support legislation. Senators will now be in a position where they really do have a balance of power. They will decide to block Government measures to get the Budget back into balance or they will vote for them. There won’t be the option that this is my view and move on. There are consequences to every decision.
HADLEY:
Horse trading? Who is doing the horse trading? Who is going into bat with Pauline? I notice that all of a sudden after the Prime Minister said there shouldn’t be a place for a woman like her in Parliament he has actually made contact with her. But who is the anointed one within your Party who goes to these Senators and says, look, quid pro quo, you do this, we do that?
TREASURER:
Well, we all are in our respective portfolios but as Treasurer I have a particular responsibility in that area. I had a very good meeting with Nick Xenophon and his full team down in Adelaide last week. I am catching up with Pauline and her advisers in the very near future and there will be other meetings with her full team, I trust. I look forward to doing the same thing, offering those same briefings to Derryn and of course David and Bob so look…
HADLEY:
David, Derryn and Bob.
TREASURER:
There you go.
HADLEY:
We’re all on Christian names. I’m going to talk to Scott and David…
TREASURER:
That’s it.
HADLEY:
…and Bob and Derryn and Jacqui and Pauline and Nick.
TREASURER:
That’s it. One big, happy family.
HADLEY:
There will be ‘ie’ on the end of them. It will be like an FM radio show. I am going to talk to Bobbie and Nickie and Derrie and Scottie and everyone. I mean ‘yo bro’.
TREASURER:
Well, I think the public expects us to work this out. They have elected this Parliament and the Parliament now has a responsibility to work through the issues. Now, the issues are that we need to get the Budget back into balance. Now, we have a plan that we set out in the Budget, as I said, has some $40 billion worth of measures that improve the Budget. There is also expenditure measures in there as well and that is our plan. So, when we work with the Senate and I would hope the Labor Party in particular, I mean the Labor Party put in, what is called their Forward Estimates, when they went to the election, they said this is what, if you vote for us, it will mean for the Budget. Now, it did mean that the deficit would be higher by $16.5 billion but on their figures they included some $6.5 billion worth of savings measures that we had in our Budget. So, I would expect the Labor Party to now to vote for those.
HADLEY:
A couple of emailers and people say you need to ask the right questions. So, I will let one of them, David from Enfield, please ask Scott Morrison what the Government is doing to crack down on tax avoidance by multinationals. The loss of tax revenue is believed to be $50 billion a year. That is enough to put the Budget in the black and eliminate government debt within ten years.
TREASURER:
Well, the figure isn’t that big but we passed the multinational anti-avoidance legislation last December. We increased the resources to the Australian Taxation Office by setting up a specific unit to go specifically after multinational tax avoiders. Every single foreign investment application that is approved by me as Treasurer requires a tax deed to be signed by the purchaser which protects against, for example, shifting profits offshore so they pay less tax and if they are found to be in breach of that then I can force a divestment of the asset. In the Budget I outlined a new tax called the diverted profit tax which means if they seek to shift money offshore and not pay tax in Australia and we nail them they will pay a penalty rate of tax on top of the corporate tax rate. So, we are the Party that actually has got along and done things about this issue and that is how you ensure that multinationals pay their fair share of tax in Australia based on the income they earn in Australia. I have made the same points when I was up at the G20 a few weeks ago and we actually are leading the world when it comes to toughening laws on multinational tax avoidance.
HADLEY:
Now, this $500,000 cap on after tax contributions in super. You have now said there will be a technical change, or there might be a need for technical changes.
TREASURER:
That is what I said to you last week.
HADLEY:
Yes.
TREASURER:
And the week before and the week before that.
HADLEY:
Good, good, well, people keep saying can you ask him now what the technical changes will be or what range of technical changes we are talking about?
TREASURER:
Well, exposure draft legislation will be coming out soon and it will be set out there but some of them, Ray…
HADLEY:
So, the answer is you won’t tell me because they are driving me cuckoo about the technical changes.
TREASURER:
But I have already outlined what some of those changes were even during the election campaign. So, one of them, if you get a pay-out as a result of an accident or something like that then that is exempted from the $500,000 cap. If you have entered into a contract before Budget night to settle on a property asset out of your self-managed super fund and you are using after tax contributions to settle that contract – well, that won’t be included. There are other measures that will be in the exposure draft legislation and that will be coming out shortly. So, these are technical common sense.
HADLEY:
You won’t lift the cap…
TREASURER:
Well, again, I make the same point to you, Ray, as I did last week. The only people that would benefit are people who are already on average have $2 million in their superannuation scheme, have already put $700,000 in after tax contributions. That is not their superannuation guarantee levy. So, they have already put on average $700,000 in and somehow the great fairness thing that has to be done here is let them put $1.2 million after tax. Now, I don’t know too many people out there Ray who are sitting there with a bag of $500,000 which they want to put in their superannuation fund. I don’t know these people. Well, there are about 42,000 of them in the country and that is less than one per cent of the superannuants in this country. Now, they are on higher incomes, have higher balances, have already benefited significantly from the generous tax contribution and other concessions that exist from superannuation and the argument they are making is – I want more. I want to put more in so I don’t have to pay as much tax as someone else is on those earnings. So, look, I think this is a fair measure and I stand by the measure. How can I say Ray, to those who are having to face, I am saying we should be getting rid of the Family Tax Benefit supplement payments every July, ok? And that is to people who earn a lot less than those who are able to put half a million dollars after tax, after all their other superannuation contributions into their super account, and I am saying to them that supplement has to go so we can pay for childcare changes. How can I look them in the eye and at the same time say, oh no I am going to protect this interest over here who is sitting on half a million bucks that they want to load in and stuff more in so they can pay less tax on it.
HADLEY:
Are you suggesting that what has been allowed to happen is a rort? Now, I have spoken to some people involved in the placement of such funds, and they say, it’s been far too liberal to allow people, and that would support your view. But what I’m saying to you is, it hasn’t been sold properly despite your protestation that you’ve explained it uphill and down dale, the general view is, that you’re being too tough, when in fact people in the industry, the superannuation placement industry tell me that it has been available to rort. That people over 60, and they say the idea was for them to work less, and accommodate themselves by drawing down on super…
TREASURER:
Well, that’s the transition to retirement scheme which is different to the post tax contributions.
HADLEY:
But people have been abusing the system where they get to that stage and they work more.
TREASURER:
There are two separate issues here but the principle applies to both. The tax arrangements for superannuation have been extremely generous and they were made extremely generous at a time when there was $20 billion of surplus in the Budget and $40 billion in the bank. Now, the simple truth is going forward with the way things are globally and where the Budget is at is those sorts of concessions can no longer be afforded and if I’m going to make changes as I have as Social Services Minister to pensions, if I’m going to make changes to family tax benefits, if I’m going to do those sorts of things then frankly we need to ensure that these savings and these other revenue measures are felt evenly across the population.
HADLEY:
Just back to the Senate briefly because I’ve just noted David Leyonhjelm, who you have got to deal with, are you going into bat with him?
TREASURER:
Yeah David and I have had a very good working relationship.
HADLEY:
He’s politically conservative, I’ve clashed heads with him a number of times over a number of issues, but he says he wants the Government to back his plan to import rapid fire shot guns. You just grimaced…
TREASURER:
Well, I do because look, fundamentally this is an issue that falls to the states and they’re the ones who have to make a decision about, look I’m not an expert in the firearms area but as I understand it, they have to make a decision about the classifications in relation to these firearms and do that across the states. I mean the Federal Government does not control that. But we have sought to broker a solution and it’s for the New South Government and the other state governments, Queensland Government, to make a decision on that issue that he has a strong view about. Now, I don’t share David’s views on guns, I don’t. But he’s a Senator, he’s putting that view, and he’s putting it strongly. Look the Parliament we are in will mean there will be a lot of these issues, and a lot of give and take. I mean Nick Xenophon made that point this morning. But it is give and take, I mean Nick has raised with me, as has Rowan Ramsay, who’s the Liberal member for Grey down there, the issues around Whyalla and Arrium. Well sure, and we’ve been quite constructive on that issue as well, we’ve put $50 million into a new plant down there just recently. But, there has to be, what is also important though, is that we get the Budget back into balance. And that means there does need to be give and take.
HADLEY:
Ok, a couple of quick ones. My college Alan Jones had a lot to say over the last week and longer about the sale of Australian property to Chinese companies, but there’s more talk now you may end up blocking the sale of electricity company, Ausgrid, to Chinese consortiums, the 99 year lease would make $10 billion for the New South Wales Government. Are you still at the consideration stage of that or have you made up your mind?
TREASURER:
No, we are in the final stages of that consideration and it’s because of the sensitive nature of this Ray you wouldn’t expect me to flag my decision one way or the other…
HADLEY:
Could you possibly tell Mike Baird you’ll let it go through and get him $10 billion if he doesn’t ban greyhound racing.
TREASURER:
Well, that’s not the sort of, well that would be dog trading not horse trading. But, what I’m saying is that the national interest issues here are the most important. And as Treasurer that’s what I’m focusing my attention on. That’s why I’m taking my time on that to make sure I’m properly informed, and the national interest issues are always... I mean, I put David Peever and David Irvine on the Foreign Investment Review Board. Now, David Irvine used to be the head of ASIS and the head of ASIO. David Peever used to be the boss of Rio and he was involved in the Defence White Paper development. The first principals review. Now, the reason I put those two gentlemen on there, is that I believe that FIRB, as Treasurer, needed to have more skills and experience on national security. So, I’ve got two very fine people joining the rest of that board who will consider that issue first, and the way it works is they make a recommendation to me, and then I make the decision.
HADLEY:
But you’d understand how the electorate feels about giving that sort of asset, or selling that sort of asset, more correctly, to a Chinese consortium. I mean if we don’t have power, we have a bit of a problem.
TREASURER:
I understand that. My national security advice will be taken from the national security agencies as you’d expect because they’re the ones who have the detailed knowledge of all the technical issues here. Now, I’m applying myself to that, but I take every foreign investment decision on its merits, case by case, and I try to do what is the right thing for Australia and in my own conscious I’m very confirmed in that.
HADLEY:
When we had the interest rates lowered last week we had the Prime Minister being treated like every other Prime Minister when he said they should pass on the full rate cut, the Big Four, and then he said, well what we’re going to do is ask you to explain yourself once a year…
TREASURER:
At least.
HADLEY:
Straight away they said, oh yeah fantastic, which means they’ll pay you lip service and not do anything about it, about the full rate cut. Now, obviously Labor’s pushing for a Royal Commission…
TREASURER:
Into what exactly? I don’t know what it is because they haven’t got a terms of reference…
HADLEY:
Well, let’s just suggest on their behalf it’s into the banking sector…
TREASURER:
Well, you’d have to because they don’t have anything to suggest themselves. It changes every day, they change it every day so I don’t know what it’s into.
HADLEY:
Well, let’s not bash them up, they can do their own bashing up. You would agree that the banks will pay you lip service and turn up to this, once, twice a year gathering, and they’ll send down their CEOs and they’ll be cross-examined and so it will go on, and then the next time there’s an interest rate cut, as sure as God made little green apples, they won’t pass on the full cut. However, at some stage in the future when the Reserve Bank increases them, within 24 hours the Big Four will increase them by the full rate.
TREASURER:
Well Ray, I don’t share your cynicism, what I think this does is puts the banks in a position they’ve never been in before. Ever. Where they will have to come and front the Parliament which is what that committee is, and operates under their rules in the same way that Glenn Stevens and former Governors of the Reserve Bank have had to do that, in the same way that the head of APRA has had to do that. And what this is about is a forum where they explain their decisions which currently doesn’t exist in this way and I think that puts tension in cord. I think it provides the opportunity for the banks to explain how they’re progressing other areas of culture change in their organisations which is important. But what they have to balance up and which is their commercial decision and your listeners will fall into each of these categories. The shareholders of the banks which are superannuants in particular, and banks are pretty much seen as a dividend factory, for those funds, and so they’re wanting returns out of the banks, to support their incomes. So, the decision, the banks would argue, that they made on the interest rate change last week, was in favour of those shareholders, many of whom would be your listeners. There are the depositors, and they lifted term deposit rates, now, they didn’t lift them for the basic savings deposits, but they did for term deposits, and that would have been, for once, a piece of good news after a rate cut. And then there’s, of course, the lenders. Now, the lenders aren’t just mortgage holders, the lenders are also small businesses, they’re credit card holders. So, this provides the forum for them to explain all of those things and how they balance all of that off against each other and ensure that we have a strong banking system. Now, the alternative to that is Bill Shorten just engaging in the most rank, cynical, opportunism. He is not interested in bank customers. He is just interested in causing a bit of pain and havoc out there and cause a bit of trouble. He has got no interest in the bank customers. He is just interested in his own political agenda.
HADLEY:
Now, just back briefly to Ausgrid again, one final word on it. You understand no matter what decisions you make on the sale or the 99 year lease to a Chinese consortium that you will be applauded by many if you block the sale but then of course Mike Baird will be filthy on you because all of that infrastructure that he is, at the moment, planning or actually doing is on the back of a sale of the poles and wires. I mean you can’t really win.
TREASURER:
Well, you know, that is the job, Ray. There are no easy decisions. This is not an easy decision and there are implications of the decision both ways. I mean foreign investment is a very sensitive issue out there in the public and it has to be managed carefully. I mean Australia has relied on foreign investment ever since Captain Cook showed up, pretty much, for our prosperity and investment into the country is critical to future jobs and the jobs that people have right now. We need to ensure that we have that investment and it is done in the right way in the national interest. But above and beyond all of that national security outranks everything.
HADLEY:
Ok, as always thanks for your time.