2 February 2017
Transcript - #2017006, 2017

Interview with Fran Kelly, RN Breakfast

SUBJECTS: Energy prices; Bill Shorten and Labor’s opposition to lower power prices; Turnbull Government’s Enterprise Tax Plan to drive economic growth; negative gearing; Prime Minister

FRAN KELLY:

Treasurer, welcome again to Breakfast.

TREASURER:

Great to be here Fran.

KELLY:

Treasurer the Prime Minister says coal will have a role to play in Australia’s energy mix for many decades to come. Is the Government open to help paying for these new super critical clean coal plants?

TREASURER:

Already we have over a number of years in terms of the research which has been conducted, and that was the point that he made yesterday after some $590 million of investment in that, that we’re yet to see that crystallise into something that would create that sort of capacity. The point that he made yesterday is not only being technology agnostic about these things, but being resource agnostic about this and I think, as we said yesterday, coal is a big part of the future under a Coalition Government, and clearly that’s not the case under the alternative.

KELLY:

Well in terms of being resource agnostic, can I ask you again is the Government prepared then to contemplate subsiding the building of these so called clean coal powered stations?

TREASURER:

As Josh Frydenberg said today, it’s the Clean Energy Finance Corporation. It’s not the wind energy finance corporation. It’s important that we ensure all the opportunities we have to drive the transition to maintain and build a competitive energy advantage into the future. And why do we want to do all of that? Because energy costs are smashing household budgets and they’re smashing balance sheets in businesses. We understand that. You go to South Australia and I’ll be there later this week, and they will talk to me about the support for company tax changes, but more than that they’ll talk about the need to end this chaos that we’re seeing in South Australia and our attention is firmly fixed on that.

KELLY:

That sounds like a yes, that sounds like you’re opening up the notion of using the $10 billion loans facility with the Clean Energy Finance Corporation to help subsidise the building of some of these super critical coal fired power stations, is that the plan?

TREASURER:

We’ll have more to say about the specifics of this as the year goes on Fran, I’m not about to make any of those sort of announcements now. What the Prime Minister has said, is we are committed to ensuring that people know that coal has a key role to play in the future of energy affordability and security and sustainability in this country. And you have to ask yourself the question, why would the Labor Party be opposed to lower power prices? And they are opposed to lower power prices, cause they want a 50 per cent renewable energy target which is job destroying. They want a higher emissions reduction target to be signed up to, they are cheering on the closure of coal fired power stations. Now you might think that’s a harsh criticism, but that’s the point of their policies to shut those power stations down and they having nothing to offer to what happens next. Now what we’re saying is…

KELLY:

I guess it’s where we spend the money isn’t it? These super critical coal fired power stations don’t come cheap. I’m just putting the economics out there. The climate and energy college of Melbourne University calculate replacing existing coal fired power generators with the cleaner technology would cost upwards of $60 billion. Has the PM asked you for options on how we might help fund these new generation coal stations?

TREASURER:

Well the Budget is in May, it’s not today. What we’re signally very clearly is that coal has a clear role to play, as I’ve said, in our energy future, in our energy infrastructure future, and the extent to which the Government is involved in that, well that will be worked through in the same way, and on the same basis on the economics of our investment in any other area. This is about a common sense approach, not an ideological approach. Bill Shorten is taking an ideological approach driven by his fear of the far left of the Greens and his own party who are pulling his strings.

KELLY:

But it’s only common sense that the economics stack up, and for the economics to stack up, presumably, you’d have to be attracting private investment in these plants, and there’s no sign of enthusiasm for that. I mean look in the paper today, AGL Energy owns large coal fired power stations in Victoria, New South Wales, says it will not build, finance or acquire any clean coal fired power stations.

TREASURER:

What has to stack up is what stacks up for families and businesses. And if we’re going to allow energy prices to continue to escalate because we want to walk off the edge of a cliff on power security as coal fired power station, after coal fired power station closes with nothing to replace it at the same base load capacity, well that’s not a plan Fran. That’s Bill Shorten’s plan. That’s not our plan. The Prime Minister is making that very clear, and that coal and gas, which he highlighted also yesterday, which is locked up around the country and having to deal with the difficult issues around that, also needs to be addressed. But you go beyond that and there are competition policy issues around transmissions and pipelines and all of these things which the ACCC is looking at as well. There’s a common market issue that needs to be addressed which I know Josh Frydenberg is addressing. So energy security, affordability and sustainability has to address all of those issues and we are.

KELLY:

And we are. And we are looking at spending money on it, according to Arthur Sinodinos, the Industry Minister. He’s quoted suggesting that re gas, as you say, the Government is interesting in getting the states to lift their bans and open up coal seam gas reserves. Arthur Sinodinos suggesting in the Fin Review today that giving the states money to pass on to farmers as compensation for their land being accessed for GST extraction could be a good use of Government money.

TREASURER:

Why wouldn’t you consider those sorts of things?

KELLY:

They already get compensation don’t they?

TREASURER:

Why wouldn’t you try and address the issues that are locking up Australia’s gas supplies?

KELLY:

But is that the issue? Because the…

TREASURER:

Well there’s not just one issue Fran, there are many issues. That’s the point. That’s the point. There are many issues that have to be addressed here and Arthur is right to highlight where we need to consider new ways of dealing with what might be the obstacle to getting these gas supplies. So whether it is there or whether it is making it really clear that we do not have Bill Shorten’s ideological opposition to coal driven by left wing political advocates which are driving his agenda, we are not signed up to that. He has signed up to that and that means higher power prices for families and business.

KELLY:

Yes, but the gas companies already compensate when they do come onto someone’s land for coal seam gas.

TREASURER:

What we have a problem with, and I think the report outlined this, is gas supplies are locked up. So, you have got to unlock them and you have got to look at practical ways and common sense ways of doing that. Bill Shorten is ideologically opposed to lowering power prices by addressing these issues that we have highlighted. There is a clear difference. He wants higher power prices, a bigger impact on families, continuing to see these power stations close and the jobs that go with them and nothing to replace it.

KELLY:

Treasurer, cutting the company tax rate from 30 per cent to 25 per cent is central to your economic agenda. When would all of us get the $750 a year the PM told us yesterday would flow through via the higher wages? The opposition says it would take 20 years, 2037 and it will be an extra $2 a day.

TREASURER:

The opposition, when they outlined their investments prior to the election the pay-off period for theirs based on the OECD report they referred to was 80 years. So, we are well ahead of their timetable.

KELLY:

But is that right 20 years? In 20 years we get $2 a day?

TREASURER:

It begins immediately. It builds up and begins immediately. This year we will cut the tax for small and medium sized enterprises up to $10 million and that includes also a cut in tax for unincorporated businesses which I think is a point that has been lost by reading some of the commentators today. Yes, we do know that the vast majority of small businesses are unincorporated and that is why we will be extending a tax cut commensurate to those businesses as well up to a turnover of $5 million. So, that would start immediately. That would start this year. If you are in one of those businesses, if you are working in one of those businesses, then you can expect greater certainty for your job in a small business like that because of those tax cuts this year.

KELLY:

The Government says if we don’t make this cut we won’t be competitive but isn’t the truth that we can never win a race to the bottom on corporate taxes? I mean Donald Trump is talking about cutting America’s rate to 15 per cent. Surely business needs to do more to compete globally then just relying on a pledge of lower taxes.

TREASURER:

Well, of course and that is why we have an innovation and science agenda, that is why we have a trade agenda. Bill Shorten is against trade, he is against more efficient coal-fired energy which would keep prices down, he is against business in what he is saying around these company tax changes, which means he is against jobs. On company taxes, just last night, the Indian Government announced they were going to introduce a tax cut for small businesses in India – not terribly dissimilar to what we are doing here in Australia. So, this is an agenda that is going around the world which we have been part of and we are ahead of the curve on this which is saying that capital is mobile, it will move where it will get the best profit and that profit will be impacted by the tax regimes and whether they are competitive. Now, if you want an uncompetitive tax regime vote for Bill Shorten’s plan which is to keep taxes higher on business.

KELLY:

Yes, but it is a $50 billion cut to company tax over the next decade. Could you sell this better if you combined it with say removing tax concessions for negative gearing which costs the Budget a lot and contributes to housing affordability and that is a real hot button issue?

TREASURER:

Well, it is a hot button issue but it is also a very simplistic and one dimensional view of the housing affordability challenge…

KELLY:

It’s an element of it.

TREASURER:

Well, the point that is being made about that is the impact of investor borrowing, investor participation in the housing market. APRA, our regulator, took action to curb the growth in investor lending and we did see a dramatic reduction in the growth of investor lending as a result of that…

KELLY:

Not in the growth of house prices.

TREASURER:

Well, what we did see was investor lending go off the boil. Now, in more recent data Fran I have seen those numbers change and I will be discussing that with the regulators and others. The issue here fundamentally is about supply and that is exactly what they are seeing in the UK. That is not to say that investor demand doesn’t contribute, but that also doesn’t mean that basically taking the sledge hammer approach that Labor proposes on negative gearing will have the desired effect. It is a cruel promise, a cruel promise that they are making. They say you make that change and everybody can buy a house. Well, that is crap.

KELLY:

Just finally, the issue of political donations, the Prime Minister told us last night he donated $1.75 million to the Liberal Party last year, well this financial year, to cover campaign expenses. We all know the Coalition won the election by the barest of margins. Labor’s Shadow Finance Minister Jim Chalmer’s said the PM basically bought himself an election.

TREASURER:

That is a grubby political smear, from a grubby political hack, of a party of hacks led by Bill Shorten. The Prime Minister has always invested in causes he has believed in. I have known the Prime Minister for almost 20 years and he and Lucy have been generous and humble contributors to many great causes…

KELLY:

And no doubt about that.

TREASURER:

…whether it is political parties, or hospitals, or homelessness, or things like that. Generosity and humility are not two terms I would ascribe to the Leader of the Opposition and if he wants to own that grubby smear from Jim Chalmers he can come out and say it himself rather then get his lackey to come out there and say it for him.

KELLY:

Do you think it is a dangerous perception though that the Parliament’s richest person might have used his own personal wealth to hold onto office?

TREASURER:

Well, you are making that claim Fran. Why don’t you explain to me why you think that’s case?

KELLY:

Just because, I mean there is no suggestion of illegality, it is completely within the rules but most of us don’t have a lot money to put into, this was an election campaign, things were tight, he put in the money.

TREASURER:

Let’s remember $20 million or thereabouts, it is reported, was donated by the union movement to Bill Shorten. So, who do you think is pulling his chain? The only person who is clearly influencing Malcolm Turnbull when it comes to donations is himself. Now, that is the most transparent of any donation you can possibly imagine. Malcolm Turnbull believes in what he is doing and he has backed that up. Bill Shorten put his hand in the pocket of every union member in the country and now he wants to put his hand in the pocket of every taxpayer in the country by driving up taxes.

KELLY:

Treasurer, thanks very much for joining us.

TREASURER:

Thanks a lot Fran.