23 January 2018
Transcript - #2018003, 2018

Interview with Fran Kelly, ABC RN

SUBJECTS: Enterprise Tax Plan; personal income tax; negative gearing & capital gains tax; gambling.

FRAN KELLY:

Treasurer, welcome back to breakfast.

TREASURER:

Great to be here Fran.

KELLY:

You're going to be trying for a second time to pass these tax cuts for our big businesses, Labor says the benefits will go to quote "millionaires and multinationals and everyone else will just get the middle finger". How will you convince the Senate to back your company tax cuts.

TREASURER:

Well first of all, we need to hold Labor to account. It hasn't been the crossbench that previously went out there and said they believed corporate tax cuts would boost wages and be good for the economy. It was the Labor Party who said that. So I'm just asking the Labor Party to do what they've apparently believed in the past. The reason these tax cuts haven't passed the Senate is because the Labor Party have not been true to what they once believed and practiced when they were in government.

KELLY:

The Labor Party says the economy has changed and this point we have higher priorities to middle income earners than we do to companies.

TREASURER:

That doesn't bear out with the evidence of when they actually did these things in the past. I mean, the Labor Party are simply playing politics on this, and this is an opportunity for us to take advantage of the opportunities that are ahead this year. These new global growth forecasts demonstrate yet again that the move that's been taken in the United States, but also in other countries, the United Kingdom and France and other parts of the world where they are reducing their taxes on business, to drive their economies and to see their businesses grow, which is going to generate growth and jobs. If you don't have a strong economy, you can't have a strong health system, you can't have a strong education system, you can't have an NDIS, you can't have a pension system, you can't have the Pharmaceutical Benefits Scheme. You need a strong economy to support all of these essential services, and that's why we're doing this and Labor are stopping us.

KELLY:

But all those essential services you named there need an ongoing funding stream. The IMF says that the Trump tax cuts will help fuel stronger global growth, but also says the positive impact will only be temporary. It warns the tax cuts will leave the US with significantly bigger debt and deficit. It's a very expensive one off sugar hit, isn't it?

TREASURER:

The difference between what is happening in the United States and what we've proposed here in Australia, is our budget goes back into balance, projected for 2020-21 inclusive of the corporate tax cuts that we outlined prior to the last election.

KELLY:

I hate to be cynical Treasurer, but we have heard about budgets going into surplus for many years now.

TREASURER:

In the five statements I've released as Treasurer, on every single occasion the projected balance has been 2020-21, and the balance in 2020-21 projected has increased, not decreased. We've taken a very conservative approach to our budgeting, that figure hasn't moved and the fact that that figure hasn't moved Fran, as I said, when we released MYEFO in December has been one of the key reasons why we've been able to maintain our AAA credit rating. But the facts are these. In the United States, they've cut corporate taxes. You've got Apple, who are going to invest $30 billion more in the US economy. You've got Walmart increasing wages. You've got other companies which are increasing their benefits for their workers, you've got other companies, whether it's Chrysler or others, who are investing more in new plant and equipment in the US economy. If we reduce the tax burden on businesses, they invest more both in their workers and in their businesses.

KELLY:

Well, it's early days in the US. Let's see what happens, we've got companies here like Qantas and MYOB saying they would use tax cuts to fund new investment and higher wages…

TREASURER:

Great! Fantastic, wouldn't that be great Fran?

KELLY:

That's what they say, but people have to believe that this will occur. Have you sought firm guarantees from these companies that their workforces will be better off if the tax rate is cut?

TREASURER:

It is the experience of this policy.

KELLY:

It's also the experience that shareholders get a fair whack of it too, in fact this is a point that the IMF makes.

TREASURER:

Shareholders have invested in the company Fran, shareholders are self-funded retirees, shareholders are Australians. I mean we want our companies to do well. Name me one policy that the Labor Party is putting out there that is going to lift wages.

KELLY:

I'm not here to talk about the Labor Party, I'm here to talk about your company tax cuts…

TREASURER:

… which are going to lift wages Fran.

KELLY:

The IMF, along with its suggestion that this will be good for global growth, that it will be a sugar hit, is urging governments - including Australia's - which will benefit from the US fuelled growth to ensure that it results in more inclusive growth. What guarantees can you give that your tax reform package will provide benefits for all, and not just for shareholders and not just for the executives in higher bonuses?

TREASURER:

In March of this year [correction 2017] when we passed the first round of those tax cuts, which were for small and medium sized businesses up to $50 million, over the course of last year 400,000 Australians got a job. That is the strongest year of jobs growth of any on record.

KELLY:

So you think we're already seeing that dividend?

TREASURER:

We're already seeing it, we're seeing small businesses reinvest in their own workers, we're seeing small businesses actually reinvest in their own businesses. We're backing small businesses with those tax cuts. Tax cuts which I note yesterday, the Labor Party could not bring themselves to say that they would back. So let's be under no doubt here, if the Labor Party is elected at the next election, the small business tax cuts are gone. They are gone.

KELLY:

We'll be talking to Labor about that hopefully over the next week to try and get them on the record about that. You're still listening to RN Breakfast, its 17 to eight, our guest is the Federal Treasurer Scott Morrison. Staying with tax cuts of a different kind, the election here in Australia is due by May next year. Don't mean to be talking about elections so early, but what that means is that this year's budget could be the last one before the government goes to the polls. You've said you personally are on a mission to find room for personal tax cuts. The budget is still in deficit, $23 billion in deficit, will we see personal tax cuts in the May budget?

TREASURER:

Those are decisions for as we go through the year, about the timing of these things. We made it very clear that that is where we're heading, with personal income tax cuts. It's an important point, because I can assure you of this. People will see personal income tax cuts before big companies will see company tax cuts. Let's not forget, the company tax cuts that apply particularly to the large businesses, they don't come in for some six or seven years. What we will be doing is delivering medium income tax relief as soon as we can. We've got a budget this year, and I'll have more to say about that between now and the budget and at the budget and beyond. Personal income tax cuts for middle income Australians will certainly be realised under a Coalition Government long before any big company gets a corporate tax cut.

KELLY:

In your view, is that an important thing to put in place to convince the voters? Because I've been watching the text line as we've been talking and it's the same question I always get when we talk to you about company tax rates, which is, 'one very simple question to Mr Morrison, how do you get a tax cut to those companies who do not pay any tax? Most companies in Australia only pay 10 per cent.' There's that view, and there's also the view which is, when corporate tax cuts are passed what public services will be cut? People don't believe their going to see the benefit of this and they don't believe companies are paying enough tax.

TREASURER:

That's why we've got the Multinational Anti-avoidance Laws, that's why we've got the Diverted Profits Tax, that's why we've got the toughest crackdown on the black economy that we've seen in decades. We are ensuring that we are pulling that tax where it should be paid, where companies have legitimate expenses and aren't making profits. Remember, for several years, many years, we were seeing profit performance in this country very, very weak. When companies don't make profits they don't pay taxes. At the larger end, when they're paying taxes, and we continue to crack down on those. We had the bank levy at the last budget so people are familiar with that. Companies should pay their fair share of tax, there's no doubt about that. When they make money here in Australia they should pay tax on it here in Australia and that's what our laws are designed to do. Laws that Labor voted against by the way. What we'd like to see is the overall tax burden on individuals, particularly middle income Australians, and on businesses, especially small businesses who we've already delivered for, to be lower. Lower taxes is good for higher wages, stronger growth and stronger services because it grows the economy.

KELLY:

You're pretty keen to talk about Labor's policies, so let's go to that.

TREASURER:

I've been talking about mine! Company tax cuts, personal income tax cuts, let's talk about energy.

KELLY:

Over summer, your trenchant opposition to changes to the tax treatment of housing investment was undermined to a pretty large degree by the Treasury on the face of it. We learnt that Treasury had advised the government that the long term effect of Labor's policies on property prices would be modest, so Labor's policies on negative gearing and CGT would be modest. Not catastrophic as the PM and you had been warning. You must have had this advice from Treasury, why did you say it was going to devastate the housing market?

TREASURER:

I believe it will…

KELLY:

But Treasury has told you it won't, it will be modest.

TREASURER:

That is my firm view.

KELLY:

From your heart, or something you've read, but not from Treasury clearly?

TREASURER:

I actually came into politics out of the property industry Fran, so I've been around the sector for a very long time. What we did last year is we took a different approach. What we did is we worked through the banking regulator APRA, and we restricted access to interest only loans and prior to that we put a speed limit on investor credit growth. What that did, is it cooled investor sentiment particularly in the Sydney and Melbourne markets, and it saw double digit house price growth fall to single digit house price growth in the space of about nine months. The calibrated actions we took as a government, by acting through the banking regulator rather than the sledgehammer of abolishing negative gearing…

KELLY:

Not a sledgehammer, a modest impact according to Treasury.

TREASURER:

It's two years on from that Fran, and with the subtle slight change to interest only lending we saw double digit house price growth fall to single digits. Can you imagine if you pulled the rug on negative gearing, which has been there for a century and is an established feature of the housing market in Australia, not just the impact in Sydney and Melbourne, but what would be the impact in Perth, in Adelaide, in Hobart?

KELLY:

I'm going to interrupt because we're almost out of time, we've got two quick questions. Tony Abbott has suggested one way of taking the pressure off housing prices, to make it easier for Australians to get jobs would be to scale back immigration. Do you agree with Tony Abbott that our immigration intake is pushing up house prices?

TREASURER:

I think immigration has to be managed well, and there is an opinion piece that I had in The Australian today which talks about the fact that our immigration program has been an important part of Australia's economic success. But it has to be well managed, your borders have to be secure and it has to become focused on skills.

KELLY:

But should it be wound back now, is it too high?

TREASURER:

I think it has to be managed sensibly Fran, so I'm not going to get into that debate. What I'm going to get into is what we've done in practice as a government. We have managed immigration carefully, we have kept it focused on skills, we have protected the borders to ensure that the system has integrity and that underpins confidence by the Australian public in our immigration program, which is critical to Australia's future economy and our society.

KELLY:

On another issue after eight, we're going to be joined by Tasmania's Opposition Leader Rebecca White. Labor's policy is to remove poker machines from clubs and pubs in that state. In your home city of Sydney, the Fairfield Council has more than $8 billion pumped through the pokies last year. Overall in New South Wales, $80 billion went through the pokies. As a Treasurer, as a human being, how do you feel about those stats? $80 billion in one state.

TREASURER:

I've always been uneasy about those things Fran, but at the same it's a free society and how people want to spend their leisure dollars is up to them. I will say this. Where these things can be evidence of money laundering and things like this, you can rest assured that AUSTRAC and the federal police and others will be closely watching that. We've established the new Home Affairs portfolio now, it's up and running. The most integrated domestic national security infrastructure we have seen in this country. On top of that, from next year you will see, you won't be seeing the online gambling ads before 8 o'clock for sporting events, you won't be seeing it. That is an action the government has taken and I think that reflects our concern about ensuring that the gambling issue is managed sensitively and carefully to protect vulnerable Australians.

KELLY:

Treasurer, thank you very much for joining us.

TREASURER:

Thanks Fran, great to be here.