28 September 2015
Transcript - #2015003, 2015

Interview with Neil Mitchell, 3AW

SUBJECTS: Government spending, taxation, Medicare Benefits Schedule Review, penalty rates, Fairer Paid Parental Leave Bill, infrastructure

NEIL MITCHELL:

Treasurer Scott Morrison, morning.

TREASURER:

G'day Neil. We are feeling pretty left out in NSW, we are in no finals this weekend whether it is the AFL or the NRL so not much cause for celebration up in Sydney this week.

MITCHELL:

Well don't come to Melbourne. Ok we have a new team, we have got new energy, same problems. What spending cuts are you looking at?

TREASURER:

Well it is all about controlling the growth in expenditure. We are currently at around 26% of GDP for our expenditure and that is unsustainably high. So it is about keeping a lid on the growth and the pressures. As we have discussed previously in the last portfolio in the social services area alone we are growing at around 3.5% real and that has many factors behind it, the ageing of the population, things of this nature so you have got to keep it tight.

MITCHELL:

So what's on the table?

TREASURER:

Well first of all you have got to make sure you don't go down the path of just keeping spending new money all the time. That is a good start…

MITCHELL:

So that means restraint in promises?

TREASURER:

It is about restraint. That is the key point I think here. It is not about cuts, it is about control because if you can control expenditure and can get a tax system that is going to help grow the economy then that is what is over time going to strengthen the Budget and this is what our focus is.

MITCHELL:

But you will need cuts as well, surely?

TREASURER:

Again we need control Neil, that is what we need – control.

MITCHELL:

Is that a new word for cut?

TREASURER:

No it is a real word for keeping the lid on the pressures that are driving expenditure up and at 26% of GDP that is not a sustainable position. Now we already have savings measures – some $50 billion worth that have been introduced over the last two years which going forward over the Budget when some of those will start to take effect then that will see that position improve…

MITCHELL:

Do you need more?

TREASURER:

We just need to keep a close eye on it and that is what the Expenditure Review Committee process is all about and that is what Mathias Cormann and I will be focused on like a hawk.

MITCHELL:

So you keep a close eye on it, you don't go into it saying 'we need more cuts'?

TREASURER:

What I am saying is 26% per cent is too high…

MITCHELL:

Yeah but do you achieve – do you fix it by cutting it or by freezing it?

TREASURER:

You fix it by controlling it Neil. That means looking at eligibility issues, it means as we already, have as people know, some of the measures I brought through when I was in the previous portfolio. It is all about ensuring that the way we spend money, and I don't think there is anyone out there anywhere who could say that of all the money the government spends – over $400 billion a year that every single cent is spent in the best possible way it could. So it is about spending money better, targeting it better and ensuring the pressures that are driving up expenditure are kept under control. Otherwise you just use your tax system to chase your spending. The problem with our tax system is not that it doesn't meet the spending aspirations of governments, the problem is it doesn't fuel the economic aspirations of Australians and Australian businesses. That is what we want to change.

MITCHELL:

Ok. You talk about controlling expenditure, does that mean you also increase revenue?

TREASURER:

The revenue issue I believe is best addressed by having a tax system that unleashes the power in the Australian economy. Now our opponents have a different view. They think there needs to be structural changes in the tax system which raises the tax burden. Now that is not our approach. We think that if you can get a tax system that unleashes people's incentive to save, to invest and to work then you can grow your economy and that is what will see revenue rise over time.

MITCHELL:

Would you look at a GST increase?

TREASURER:

I have said anything that helps Australians work, save and invest as part of a total package are the things I am interested in. I think part of the old debate was all about individual items – rule this in, rule this out. What I am interested in is good ideas which will say to Australians – and let's talk about Australians on the average wage - in 2016/17 an Australian on an average wage will be in the second top tax rate. Now the last time that happened, the risk of that happening, was back in 2000. Now that is a serious problem that we have to get our heads around and as we work through the process of changing our tax system it is all about how is it going to ignite the aspiration of Australians.

MITCHELL:

Alright well here is a good idea – indexation of the tax system.

TREASURER:

Again, anything that is going to help people work, save and invest Neil I am open to.

MITCHELL:

So would you look at that?

TREASURER:

I have just answered the question, that is exactly what I am interested in…

MITCHELL:

You are open to tax indexation?

TREASURER:

I am interested in anything that will help Australians work, save and invest and I am not going to get into the details at this point because we are still working through a package but what I am saying to Australians I think very clearly is I want the tax system to work for them, not them to work for the tax system.

MITCHELL:

But you want a debate, should we be debating an increase in the GST or not?

TREASURER:

There will come a time for specific measures to be debated but right now, and there will be a green paper, that is the white paper process that was already in train and that process will continue but I think one of the problems right now is I think people listening to the program Neil would go 'oh tax reform, that is just an accountant's picnic where the government is just going to whack up the taxes on me'.

MITCHELL:

Well we have had a lot of governments talk about it and we are still getting screwed.

TREASURER:

And this is why I want to change…

MITCHELL:

You agree we are getting screwed do you?

TREASURER:

I don't think the system currently really does sufficiently reward people who work, save and invest. That is what I genuinely think. Now what I am going to be saying to the Australian people, and what I am saying, is the system I want to put forward and changes I would propose and the government would propose would be ones that address that goal, not simply try to address the spending aspirations of people who just want to spend more taxpayers money which is what our opponents in the Labor Party seem to want to do.

MITCHELL:

Is this why changes to Medicare are on the table? To save money?

TREASURER:

No the changes to Medicare are all about modernising Medicare…

MITCHELL:

But it would save money wouldn't it?

TREASURER:

Well that is not clear one way or the other at this point.

MITCHELL:

Ok.

TREASURER:

What is clear is Minister Ley has put in place a process, a highly clinician-driven consultative process which is looking at a schedule which has been around since the early 80s. The rate of increase in the number of things on the schedule has been significant over the last ten years and it is time for clinicians and the community and the government to have a close look at it. That seems to me like an outbreak of common sense.

MITCHELL:

You were formerly in the tourism industry which has long been a critic of the penalty rates system, do you agree with Josh Frydenberg we need a serious review of Sunday penalty rates?

TREASURER:

My priority is about the tax system as I was just saying. There is a Productivity Review process on those issues. Under this government we are not going to allow decisions to just tumble out of the sky Neil. If there is a discussion about these things it will be a proper one, it will go through a proper process. There is a report already in draft form and that is where that discussion is best held. But we are in a low wage growth environment at the moment and I think the thing that is principally undermining the performance of our economy currently is largely around how the tax system interfaces and it is also about how our benefits work with the tax system. This is one of the key structural problems in our economy – the interface between benefit payments and what you pay in tax. What all that means in simple terms is it has got to reward you more to work than stay on a benefit.

MITCHELL:

So does that mean you don't see industrial relations reform as being crucial?

TREASURER:

No what it means is I am the Treasurer and my focus is the tax system and there is a broader discussion about our labour market which has been going on for a long time. If it is to go down these paths then it should do in a consultative way through a proper process and it won't be the product of things just tumbling out of the sky.

MITCHELL:

No but as I read it Josh Frydenberg is saying you get rid, well you cut Sunday penalty rates, you increase the business opportunity and that helps your tax system because you bring in more money.

TREASURER:

One of the problems with all of these debates is they go so quickly to the features and really don't talk about the benefits. There is any number of ways you can address these sorts of issues and what we want to remain focused on at the moment is setting out clearly to the Australian people what our goal is. Our goal is to encourage growth and the way we think we can best do that in the next six months or so where my focus is - that is trying to get a tax system that works for Australians.

MITCHELL:

Ok. I notice Peter Costello said on the weekend he thought Australia was heading into dangerous economic times. Do you agree?

TREASURER:

We are working against some pretty strong headwinds but there are also some tail winds as well. I think we are doing very well in a difficult environment. That is the sort of global consensus. We do have to have an economy and people in our economy who can transition at the moment. I think we all understand that it is a time of transition for us. People are moving from particular jobs into new jobs. We have had growth in jobs of over 300,000, over 100,000 in Victoria since the last election and we are trying to make sure our services economy is building and growing and I think that is particularly important for Victoria as well.

MITCHELL:

Have you done a handover with Joe Hockey yet? Have you talked to him?

TREASURER:

I haven't had too many opportunities to talk to Joe but Joe and I text messaged at the time and he has made himself totally available to me. At the moment I have been talking to the Reserve Bank Governor and Treasury officials which I know Joe would understand. But we have had, he said some very kind things and I was happy to reciprocate. Joe did some very hard yards in this job and I think in particular he did an excellent job in working through those international processes and the G20 to produce the multinational tax arrangements which he introduced to the Parliament in the last sitting fortnight. I commend him strongly for that but also for his infrastructure initiatives. Joe was an infrastructure treasurer and he did a tremendous job on those issues.

MITCHELL:

You talked about specifics, one area of not discussing specifics and concerns me a little is uncertainty. Superannuation is a good area. Are you looking at changes to superannuation?

TREASURER:

Well again it is the same answer Neil. Anything that is going to help Australians work, save and invest is what I am interested in. The opportunity which has come from the change in Canberra I think means we can ensure that we would never do anything that would impede Australians from saving for their future and those who have been able to do that over their lifetime but equally…

MITCHELL:

Are changes on the table?

TREASURER:

Look, as I said, anything that is going to achieve the outcome is what I am interested in. The old politics of a few weeks ago and the last seven years which has been very combative I think has unnecessarily stymied debate and consideration of things. It is good to be in an environment where other things can be practically considered.

MITCHELL:

But you can understand the nervousness of people with superannuation?

TREASURER:

Well I think you have got to look to our form on this and we are not ones who go around changing things willy, nilly. That happened under the previous government with superannuation. I think it is important to keep stability and certainty in that area but there have been many issues raised in the area of retirement incomes. I dealt with them quite extensively in my former portfolio in the area of pensions which you and I discussed and there is an interface between these two. You have got to get all of the systems lining up Neil. Your welfare system, tax system, your industrial relations – workplace relations system – they have all got to be lining up to achieve growth.

MITCHELL:

Capital gains tax, same area?

TREASURER:

Again I would refer you back to my earlier answers.

MITCHELL:

What about something more specific, I think it hasn't got through the Senate yet, the wind back of paid parental leave, the crackdown on double dipping if you like for people getting paid by private companies, not getting the paid parental leave double dip. Is that, are you still considering that?

TREASURER:

That measure is very much still on the table. I had been having I think some very constructive meetings with the crossbenchers about this. One of the things we have to address here is we all want people if they are taking this leave to be taking that leave to be spending time with their new infant. The concurrent ability to claim two payments at once is an issue that I think is understood to be not the fairest way of doing things. People have suggested as part of discussions that if those payments are not being taken concurrently, so it leads to actually if people are taking taxpayer funded paid parental leave then it actually leading to more people spending more time with their infant, then that is a different issue. Because the research the previous government commissioned showed that despite people being able to access two payments it wasn't actually beyond 18 weeks, the period the government pays for PPL, it wasn't leading to anyone taking any longer at home with their infant.

MITCHELL:

I know you need to get away just quickly when will you talk to Victoria about infrastructure, the East-West link not being build, what happens to that money, the Western Distributor – we have been talking about it already today – when will that get nailed down?

TREASURER:

Well I will be down to see Tim Pallas this week. We have already had a bit of an exchange and introduction to each other. I knew him previously but will be heading down to Melbourne later this week and having a series of meetings in Melbourne and one of those of course will be with the Treasurer. I am looking forward to working constructively with all the Treasurers. We have all got a really important job to do and that is no more important than in Victoria. So I am hoping we can work together constructively for the good of Australians and Victorians.

MITCHELL:

One final question, the new Prime Minister said no more slogans, what is work, save and invest?

TREASURER:

It is something we should all aspire to. That is what it is.

MITCHELL:

That's not a slogan [laughter].

TREASURER:

Well I was accused of having a slogan about stopping the boats. I think people know that was an outcome, not a slogan and [inaudible] this will be too.

MITCHELL:

Work save and invest?

TREASURER:

That's what we want to see and that's what Australians want to do so I want to help them to do it.

MITCHELL:

Thank you for your time.

TREASURER:

Thanks a lot Neil.