ROSS GREENWOOD:
Let’s go to the Treasurer, Scott Morrison. Many thanks for your time, Treasurer.
TREASURER:
G’day Ross.
GREENWOOD:
Ok, does this mean that your company tax cuts now are effectively, politically, dead in the water?
TREASURER:
I have heard that prediction a few times and so I wouldn’t share it but let’s see what happens over the next few weeks. The key point is that the tax cuts for business already have started now. We started them back in 2016 when we provided the tax relief for small businesses when we moved that threshold up from $2 million to $10 million in turnover. Then it’s gone up to 25 and it’s going up to 50. So, the tax plan to make businesses more competitive on tax is already under way. We are doing it that way because that is how you can do it and the Budget can support it over time. If you are a larger company those more competitive rates don’t come in for a number of years yet. What companies looking to invest in Australia can do is they can look down the next ten years and see, that is where the tax rate will be and I can invest on that basis. That is why it has been done that way.
GREENWOOD:
Doesn’t Pauline Hanson, her lack of support now give you a little bit of wriggle room to say alright we can keep the money, we can stick it towards paying down the national debt. We can actually drive the Budget back into surplus quicker than what we have even forecast. Couldn’t you actually look at this in an entirely different light?
TREASURER:
Well, first of all, the cost – I shouldn’t say the cost because it’s not a cost, it’s their own money that they would be able to retain in these businesses – for the tax relief that is not yet legislated, that is about $35 billion over that 10 year period. The balance has already been legislated for companies less than $50 million. What it would mean just over the next four years is only about $1.3 billion. In the scheme of things when it comes to providing significant tax relief in other areas, that proportionately is not a big sum. Over the ten years though it is obviously a much bigger figure and that is right but over the next few years it wouldn’t have a big change to what we are seeing on the deficit. And as you know the deficit turns into a balance in 2019-20. Where this goes in the Senate still I would say, let’s just see what happens. Until people sit down on one side of the Senate or the other in terms of how the vote is taken, that is how we will know, ultimately, where the Senate sits on this. So, we will continue to make our case as we have now for two years.
GREENWOOD:
It comes down to politics as well and where One Nation preferences go. I notice that even Mathias Cormann, Finance Minister, referred to this today. Here is what he had to say:
FINANCE MINISTER: Any agreements that we may or may not have reached with One Nation In relation to all of these matters are contingent on the successful passage of this legislation through the Senate. Looking at the front page of The Australian today, it might well be that we won’t ever get there.
GREENWOOD:
Is that true that you may never get to an agreement with One Nation?
TREASURER:
Of course it is and then again we might. That is why I say let’s just see what happens. In terms of preferences or any of these sorts of things, Ross, there is nothing there. Absolutely nothing there – no such agreements. For those people who are listening who live north of Brisbane there in Longman, the Labor candidate in Longman who was elected at the last election got elected on the back of One Nation preferences. So, I found what the Labor Party was saying today just a little galling frankly.
GREENWOOD:
So, Pauline Hanson also says a new set of demands have emerged and she wants the Government to build a coal fired power station. This comes at the same time as members of your own party have effectively said that they wish to have competition laws amended to force AGL to sell the Liddell Power Station to Alinta. Are these all reasonable demands from Pauline Hanson and your own Party?
TREASURER:
Well, we are not into subsidising any forms of energy. If people want to build a coal fired power station, well, all power to them. I don’t have a problem with that. Obviously state governments have to approve them. We don’t have the approval powers over what people can build in states. If people want to invest in that source of energy and that power generation, then great, we don’t have an issue with that. The only issue is should the taxpayers be subsidising it when our view is whether it is renewables or any other form we should be getting out of the subsidy business not getting into it. Subsidies at the end of the day just end up in higher power prices,
GREENWOOD:
I don’t want you to subsidise a power station but why would it be if it is so important for Australia to have baseload power and it is important for Australia and its industry to basically have guaranteed power coming from a coal fired power station. Whereas we know it is intermittent energy that comes from other sources such as wind and solar. If that is the case, why would the Government not, like it does in other parts of infrastructure, simply build that piece of infrastructure to ensure there is sufficient baseload power and ultimately recycle the asset in the future? Sell it off as you might the National Broadband Network or a piece of transport infrastructure?
TREASURER:
Well, energy infrastructure is built by state governments. All the coal fired power stations you are referring to whether it is Liddell or Bayswater, or up in Queensland. They are all built by state governments and the fact that at the last state election in Queensland the LNP actually was planning to do just that and they were unsuccessful at that election. The investment we want to see going into energy in Australia needs to be sustainable over the long term and that means it needs to stand on its own two feet. So that is where I think the direction for energy investment is in the future and you get a real transparency on what the price is of those who produce our power will be able to receive. What I have noticed with a number of these proposals is that they want guaranteed prices going out over the next 20 years. Now, how would people feel 10 years from now, 20 years from now if they had to pay more for power because we had contracted to actually say we will pay you above the odds on the power you generate? So that is why it is better not to have all these distortions and all of these subsidies and to see the investment capital come into these projects and be able to realise those projects because they was their own face and they do the job.
GREENWOOD:
Ok, I want to take you also to the Royal Commission and of course this round of the Royal Commission is concentrating very much on bank guarantees and small business lending. Now, it is still a situation where there are many small businesses and individuals who have guaranteed loans, ultimately lost houses. There have been at least two examples that have come through on this. It really again does not paint necessarily a very sympathetic view of the banks and the way in which they treat customers and especially those who end up in distress.
TREASURER:
Misconduct in the banking and financial system should face penalties and as you know we have increased the penalties and are in the process of increasing them further. Five years jail time to ten years jail time for misconduct in the banking sector. We have introduced the banking executive accountability regime laws. Now, what that means is where bankers misbehave they can’t work in the sector again. Now, these are the toughest laws of anywhere in the world. We have already introduced those. They were in last year’s budget and they are already in law and the Australian Financial Complaints Authority is a new, I put it in inverted commas, ‘tribunal-like’ authority which means that people will be able to get these issues dealt with without having to fork out for lawyers and be gamed by the banks into simply trying to raise your disputes. This is the action that we are already taking.
GREENWOOD:
But the problem is when it comes to business lending, as we are even hearing these last few days, when it comes to consumer protection you can put laws in place but as we are hearing it is a very difficult thing. I will take you to one little piece, a snippet today from the Royal Commission. This is actually Michael Hodge the senior counsel who is there for the Royal Commission. He went through Westpac, really in a very forensic way to try and examine the way in which they do it. Then at the very end turned and said this.
MICHAEL HODGE: The counter-view might be, that is not the banker’s job. The banker’s job is to assess the loan and it is the borrower’s job to make a decision as to whether the borrower wants to borrow the money and start a business. And if the borrower makes a hopeless bet, that is the risk for the borrower.
WESTPAC OFFICIAL: I think in a case where the bank is lending money to them it is a risk for the bank as well. But I agree with you that the decision to invest in a small business is the decision of the small business owner.
GREENWOOD:
You as the Treasurer, and especially of a Coalition Government you want more businesses. You want bigger businesses. You want jobs created. That is a pretty natural thing to want. The problem is the imbalance of power. AS soon as anybody with a small business finds themselves in dispute with their lender.
TREASURER:
There were some very good points made in what you just played out there and that is ultimately if people decide to start a business then they have got to make some obvious decisions about that. Particularly if you are going to go and ask a family member to go guarantor on the loan. If you are going to get your Mum or Dad, or Uncle, Aunt, cousin, whoever involved in this then you have got a pretty high duty of care to them as a relative, let alone anything else to do with the business, about the risks they are taking on in doing that. Starting a business, Ross, as you know and you broadcast all the time, it is not a risk free endeavour. Now, we have heard some terrible stories about businesses going bad and people losing homes. That is heartbreaking and you need to ensure that things are fair. Equally, what we also have to be aware of, is do we want the banks to just take the ultimate risk free approach and just not lend? If banks stop lending then what do people think that is going to mean for people starting businesses or getting loans or getting jobs or all of this. In the Budget papers, the Treasury have actually highlighted this as a bit of a risk with the process we are going through. We have got to be very careful. These stories are heartbreaking, I agree, but we have to be also very cautious about, well, how do we respond to that. What is the right reaction to that is it to just throw more regulation there which basically constipates the banking and financial industry which means that people can’t start businesses and people can’t get jobs, people can’t get home loans. Or do we want to move to a smarter way of how this all is done and I think in the era of financial technology in particular there are some real opportunities there. We are going to continue to listen and carefully respect the Royal Commission, not prejudge the findings, but be very careful about any responses that are made because this can determine how strong an economy we live in over the next ten years and whether people get jobs and start businesses.
GREENWOOD:
Treasurer, Scott Morrison, as always we appreciate your time.
TREASURER:
Thanks a lot, Ross.