ROSS GREENWOOD:
Let’s start the programme though and go to the federal Treasurer Scott Morrison who is on the line from our federal Parliamentary bureau in Canberra. Many thanks for your time, Scott.
TREASURER:
G’day Ross. It is good to be with you.
GREENWOOD:
I did describe it as being the biggest shake-up to the Australian economy in more than 20 years. Would you agree that is as important as this change and the recommendations taken up by the Government today?
TREASURER:
I would, and we rejected none of the recommendations put forward by Professor Harper. He did an outstanding job and provided this report to the Government earlier in the year and today we have decided to go forward with that report and in particular in areas like human services, social services and many of the areas that come under the jurisdiction of our states and territories. This is where you need to get the micro economic reform that will drive productivity over the next five to ten years and in this post peak period for mining investment and the post peak in commodity prices and the terms of trade we won’t have those things to cover over any inability or lack of reform that will drive productivity growth. Post going into the mining boom before it happened we had multi-factor productivity growth which was just another word for saying how we realised the most of our potential in our economy. That was growing at about 1.5 per cent. Now, during the mining boom period that fell to 0.4 per cent. Now, we need to get those figures up again so we can drive jobs and we can drive growth. In competition policy it is all about more choices and better services and that will produce a growing economy.
GREENWOOD:
Ok, just one aspect of this because much of the changes in the laws and regulations that have been recommended by Professor Ian Harper and his committee is all about the state governments, not necessarily about federal government. How does federal government as you take up these recommendations, convince state governments that they need to change?
TREASURER:
Well, it is largely as it was done last time under what was known as the Hilmer reforms and there was a thing set up called competition payments and there was an umpire basically who looked at the reforms that were being done by the states and territories and they were rewarded with competition payments which basically gave them their share of the uplift of the economy that came from doing these important reforms.
GREENWOOD:
So, in other words it is a carrot and stick approach?
TREASURER:
It is a carrot and stick but this time around we will try to focus more on when they have delivered those reforms so paying on the delivery, not on the promise which happened last time. Last time this happened it increased GDP by 2.5 per cent and these are important changes that we need to make. We all know that our economy is transitioning; we all know that there is a global volatility. Australians know that but they are out there they are working hard, they are saving, they are investing and these types of changes will just help our economy continue to grow which is what will support jobs which is our laser-like focus.
GREENWOOD:
And where will you get the money to pay the states?
TREASURER:
Well, there will be the uplift in growth that will produce a growth in revenues but equally there is the opportunity to link this in with the discussions we are having with the states and territories on tax changes. You will know that we have been in that process now for a while and we will continue to be in that. I see these things as very much linked. How you change the tax system, how you boost competition and productivity, how you change what you do between state and federal governments to get a better outcome for everybody – all of these things go together to try and drive growth. Just like export agreements and getting the Budget in balance all of this is all part of the Government’s plan to drive growth and jobs.
GREENWOOD:
Ok, so does that tax reform you are talking about include the GST? Is consumption tax a part of this because it would be the biggest wedge of the revenue that the federal government could bring in to be able to, if you like, incentivise the states to make these big changes in competition.
TREASURER:
Well, it would be a way if there is revenue to flow to the states of it going as a consequence of additional reforms that are happening and getting more value added out of this process. As you know I am not a big fan of raising taxes to give states and territories a bucket of money to spend how they are spending it now. I don’t think taxpayers would like that either. I think what they want to see is Government spend their money better and what these changes are all about is to incentivise, encourage and reward states working with the Commonwealth to change things like our planning and zoning system. I mean who doesn’t get frustrated with that and who wouldn’t think that that is holding back a lot of growth and economic opportunities and job growth right across not just New South Wales but right across the country.
GREENWOOD:
So, when it comes to planning let’s say for example lots of people listen to this programme would have had issues with planning in the past no doubt. The point is, if you could standardise the procedures for planning right across the country that would actually help people out and make them more confident in being able to move on a national basis across our country because you can buy shares pretty much anywhere across this country as well.
TREASURER:
Well, that is one option but even just at the state level trying to break down a lot of the unnecessary bureaucracy and processes and systems and to free up a lot of the impediments that are there will enable – I mean look at the development of a block of land and putting a house on it and how much is tied up in fees and levies and bureaucracy and planning processes and delays. Now, that all costs people money and if you start reforming those sorts of things then you are ensuring that money stays in people’s pockets and they can spend it where they want to. That is what will grow the economy. This is what we are just so focussed on, Ross. We are looking at every way we can, whether it is trying to get the trade agreement that we put in place or how we are trying to make the financial system stronger or getting the Budget stronger or the $50 billion National Infrastructure Plan that we are rolling out around the country – all of this is about growing the economy because these are the things that we need to do to grow our economy. We don’t have the rising iron ore prices and the best terms of trade we have seen of all time not that long ago, having about a 30 per cent fall off since that time. We need to actually earn more by improving our performance on all of these things.
GREENWOOD:
Ok, I will take you through a couple of the details of the report from Professor Harper and his committee but in the meantime I want to take you to the former Treasury Secretary John Stone. I spoke to him last Friday about this. He is an opponent of simply raising the GST. Here is what he had to say -
[excerpt] JOHN STONE: All the GST will do will be to raise the level of government spending. Of course the first thing a politician will do when they increase the GST or broaden the coverage they will give a lot of so-called compensation to all these people who are being hurt by the fact that prices rise as a consequence. So the result is government spending rises. Now, look when government spending rises that means either immediately or before too long taxes have to rise too. [end of excerpt]
GREENWOOD:
Now as a former Treasury Secretary a very strong opinion from John Stone and also a very informed opinion from John Stone. Is that as simple as it is?
TREASURER:
Well if you go back to when John Howard and Peter Costello did this I don’t think that anyone today would say that that wasn’t a change where taxes were also cut, personal income taxes were cut, other taxes were cut. I think Australians understand is that we are not talking about simply looking at one tax, we are talking about the whole tax mix. At the next meeting of state and territory Treasurers with the Commonwealth we are going to be looking at all the State and Territory taxes. Things like insurance levies and things like this. And where can we actually reduce the burden of tax and change the mix of taxes people pay which makes the economy work better. Now what John Howard and Peter Costello did is set us up for strong economic growth during the time of their government. Now we are seeking to do the same thing by engaging with the states and territories and coming up with a better mix of taxes. There will be some in the debate and I am not saying this about John but some will say it is just about one tax – they are simply trying to frighten people. What we are trying to do is grow the economy. You don’t need to increase the GST to balance the budget. All the money from the GST goes to the states and territories. Every last cent. So it doesn’t change the federal coffers one bit.
GREENWOOD:
Alright I want to go through some of the big things that I think will affect people listening to this program now in regards to as they are driving home some of the changes recommended by the Harper Review that you are going to have to look at and deal with. Retail opening hours?
TREASURER:
Well it is for the states to pick that up and act on them where they haven’t already done so and in some states they already have. But in places like Western Australia and Queensland they haven’t done that. So this is a menu the states can work off. It can be retail trading hours in one state, it can be planning and zoning laws in another.
GREENWOOD:
It could be legalising Uber style taxi services?
TREASURER:
Yes it could be all of these things. Then there are issues in the energy and water sectors which is all encouraged and recommended by Harper…
GREENWOOD:
Standardising penalty rates across the board and trying to work out that you don’t get the same rate on a Saturday as you do on Sunday?
TREASURER:
Well these things are also the subject of a Productivity Commission inquiry and there are a number of recommendations here that were already in train because we have already acted upon them in other areas. So we will let those processes continue…
GREENWOOD:
Ok. Who is allowed to own pharmacies is another one out there – where the supermarkets should be allowed to have pharmacies inside them?
TREASURER:
Well that is a good example of what I was just referring to. We concluded the pharmacy agreement earlier this year and that provided a way forward for further pursuing those types of issues and we are already getting on about that in working with the pharmacists on those types of issues.
GREENWOOD:
And a final one for you for everybody driving home this evening more user-payer roads. That is one of the recommendations out of the Harper Review that ultimately people who spend more time on more roads will ultimately pay more for them.
TREASURER:
Well we have to find better ways at the end of the day of ensuring we are funding infrastructure the right way and using infrastructure the right way to get the best outcome. Again these are things the state and territory governments do every single day. If we can find better ways to do all of these things – but the one we haven’t talked about Ross is in the area of human and social services. This is the big growth sector of our economy. Basically the increase in health and social services employment in this country has effectively replaced the decline in manufacturing employment in this country as a percentage of the total employment pool. Now that is an area that is going to continue to grow and particularly with our free trade agreements and things like that we will be doing even more of that into the future. This has been an area that has largely been the domain and province of state and territory governments. The opportunity to open that and see more people get involved in that sector can only mean more jobs into the future because this is what it is all about. It is all about jobs.
GREENWOOD:
I have got to say this is the broadest reform of our economy that I have seen in 20 plus years since the Hilmer Report and the competition review there. It is bold and remember also on the heels of actually taking up all of the recommendations of the Financial System Inquiry or pretty much all of them from David Murray as well. So it is certainly cracking on at the moment, the Federal Government, from our Federal Parliament studio Scott Morrison. I appreciate your time.
TREASURER:
Thanks Ross, I appreciate that. If you stand still you go nowhere and we are certainly heading somewhere.