8 October 2015
Transcript - #2015012, 2015

Interview with Tom Elliott, 3AW

SUBJECTS: Infrastructure; Tax White Paper; providing real opportunities for Australians who want to work, save and invest; Trans-Pacific Partnership; Brian Loughnane

TOM ELLIOTT:

Joining me in the studio now, the new federal Treasurer of Australia, Scott Morrison. Mr Morrison, good afternoon.

TREASURER:

G’day Tom. It’s great to be here in Melbourne.

ELLIOTT:

Well, thank you for joining us. The Opposition Leader in Canberra, Bill Shorten, has come out and proposed giving Infrastructure Australia the power and the money to make huge decisions about where our infrastructure dollars are spent. Is this a good idea?

TREASURER:

Well, productive infrastructure is one of the key things we need to grow the economy. So, there is no disagreement about that. What the Opposition Leader has announced today is basically that he intends, if he were to be elected, to borrow $10 billion and then to on-loan that and use Infrastructure Australia as effectively the infrastructure bank to do that. Now, these are interesting ideas, any idea though is only ever going to be as good as its implementation. So, while I think there is some merit in what he is putting forward at the end of the day what has to happen is you have got to find projects that actually can pay a return. I mean it’s not grandfathering, they’re not just going to hand it out and give it to the states to build infrastructure. So, the projects he has talked about aren’t made possible by this, they would have to satisfy a test to see whether they will make money and that means someone is going to have to pay a toll, someone is going to have to pay a fare.

ELLIOTT:

I think the public has got used to that idea now. We all travel on toll roads.

TREASURER:

I agree, I agree. So, what we are talking about is borrowing more money to lend that money to projects that will make money. So, that is the model he is talking about and those things are worth contemplating but remember you have got to implement this as a Government and Labor have not a lot of great form when it comes to implementing good ideas. You can have a great idea but you have got to be able to implement it and pink batts and all the rest of it we all remember terribly well.

ELLIOTT:

Would you support though this idea of handing over the authority from elected politicians such as yourself – and you are a very powerful politician, you are arguably the most powerful, second most powerful person in the land – handing over that authority on how billions of dollars of taxpayers’ money is spent or invested to a group of bureaucrats or technocrats? That is sort of what Mr Shorten is proposing.

TREASURER:

There has to be accountability around these sorts of things and I have always believed that you should only be putting taxpayers’ money where there will be a good return on it. So, there has to be a rigorous assessment on all of that but remembering we’re borrowing money to loan money and to borrow money you have got to have a good balance sheet to do that and so you have also got to assess what would be the comparative difference between say a Turnbull Government doing this. Now, we are working on making sure our Budget is getting into the black over time, that we will have a good tight control of spending going up which means that we will always be, I believe as a Government, in a better position to do exactly the sorts of things Bill Shorten is talking about today. Whereas Labor’s record on fiscal performance means we would have a worse balance sheet and that would be borrowing money against a worse balance sheet.

ELLIOTT:

Well, speaking of balance sheets, now, for quite some time now Australian federal government spending has been about 26 – 26.5 per cent of GDP.

TREASURER:

No, it has been less than that – it is now at 26 but...

ELLIOTT:

Well, it is at 26. Revenue is around about 24 per cent.

TREASURER:

Correct.

ELLIOTT:

So, you have got 2 per cent adding to the Budget deficit every year. What are you going to do about that?

TREASURER:

Well, first of all we are going to control spending and at 26 per cent that is the highest level it has been at since the GFC and the only other time it got higher than that was during the recession when Paul Keating was in charge when it got around about 28 per cent. So, you have got to keep the control on spending in place and understand that that is a key goal. Now, how do you deal with the revenue issue? Now, one of the reasons, the primary reason, why we are not earning as much revenue as a Government as we used to is because what we are earning as a country is very flat and that has a lot to do with what has happened in commodity prices in recent times, wages growth is very flat. So what we are earning is a lot less, sorry, I should say not growing as fast as it was before. So, we need to boost what we are earning and that means you have to boost economic growth and that is why the suggestion to get more funds into infrastructure is a very good one and that is why we are doing that as a Government right now.

ELLIOTT:

So, to try to wind the deficit back and in doing so start reducing our debt pile which is still growing at the moment; rather than say increase taxes, you want to grow the economy and hope that the growth of the economy is greater than the growth in government spending?

TREASURER:

Well, you have got to get your spending growth down and you have got to grow the economy because otherwise all you do with, say, if you are just going to put up taxes, is your taxes are going to keep trying to chase your spending. Now, what you want to do is bring your spending back and allow the economy to grow. Now, that doesn’t mean you don’t have to look at how you change how you raise taxes. Now, there are two things you can do with taxes; you can jack them up and what that can do is increase the tax burden on every day Australians and that can retard the economy – it can make growth slower. So, then you have got to put taxes even further up to chase this higher spending. Now, our plan is we are going to look at how the tax system actually rewards people to work, to save, to invest which will grow the economy and then that will see the economy be in a position to support a Budget which is in balance.

ELLIOTT:

It seems to me we have a review of the tax system every three to four years. We have had two in less time than that in the past five years. Every time we have one there are about a hundred recommendations and two or three are plucked out and then they don’t get through the Senate.

TREASURER:

And then nothing happens.

ELLIOTT:

Nothing happens. But also politicians say, oh well of course the GST, or something else, is off the table, we aren’t going to change that. Is everything on the table when it comes to tax review under you now as Treasurer?

TREASURER:

Well, what the Prime Minister and I both said is that we are interested in any idea that helps us grow the economy and that means changing how we work the tax system and I will give you a good example; next year the average wage earner in this country will be on the second highest tax rate. Fifteen years ago – the last time we actually did serious tax reform under Peter Costello and John Howard – that same prospect was about to happen and they changed the tax system and that is not what occurred.

ELLIOTT:

So, we are talking about bracket creep here. So will you do something about that?

TREASURER:

Well, you have got to look at the whole tax mix and you have got to look at if you change the tax system can you ensure that people are better off as a result and you have got to look at the entire tax mix to do that and I think one of the things that has changed in recent weeks, Tom, is I think that a lot more opportunities to look at a lot more things have opened up. That doesn’t mean any one thing is being preferred or considered. We are just saying we are going to get away from this old politics where you have to rule everything in or out and by the time you get to make a decision there is nothing left on the table and the table has probably gone too.

ELLIOTT:

One of the things that has struck me about the time when Tony Abbott and Joe Hockey were in charge was that we actually increased the top rate of tax and cut the company rate of tax. Now, at the moment the top rate of tax is 49 per cent.

TREASURER:

True.

ELLIOTT:

And for small to medium sized companies it is down to, the company rate of tax is down to 28.5. So you have got a 20 per cent gap between the two tax rates. Now, to me that is what causes tax avoidance. So, again, will you look at trying to narrow those in some way?

TREASURER:

Well, I think you are asking all the right questions and we are asking all the same questions…

ELLIOTT:

But what about some of the right answers though?

TREASURER:

Well, that is what we have to work through and one of the first things you have got to do if you are talking about changing the tax system, I think many people listening to us right now go, oh they are talking about tax reform that means they just want to whack up our taxes, I will have to pay more tax, I will earn less and what is the point of all of that and I think they are perceptions we have to challenge. If we are going to change the tax system the only reason we are going to do it is to ensure that people will be in a better off position where if they want to work more, if they want to invest more, if they want to save more then they will be in a better position than they are now. That is the ruler that the Prime Minister, and I, and the Government are going to put across all of these considerations. But we are not going to rule in or rule out things on ideology or people’s preferences. It is about a stronger economy, getting people into jobs and ensuring they get the reward for their effort.

ELLIOTT:

One of the reasons Joe Hockey was criticised a lot was a failure, or an alleged failure, to sell the message. Do you think you are a better person to sell these tough messages?

TREASURER:

Well, that is for others to judge. I am simply going to explain to people is that what we are trying to do is understand that there is a lot of volatility out there in the global market place, there are a lot of things that are happening out there and I can understand that many Australians feel concerned about that but what we are saying to them is look, we are going to get to the other side of this, we are going to transition through this period of time in our economy and people are going to have to make a lot of decisions about how they themselves are going to transition through that process. We know they can, we are going to back their ability to do that and we are going to support them as they make those changes. So, five years from now, ten years from now, they will be better off and in a new economy where the new jobs will be and Australia would have taken advantage of that. The TPP and Free Trade Agreements are all part of that.

ELLIOTT:

But the reality is, and I want to talk about the TPP in a moment but the reality is that you have got to win another election in a year to do this. Assuming there are some reasonably strong changes to our tax and probably our spending system, will you enact those the next Budget or will you put them to the people before the next federal election and then run on that platform and then enact them in 2017?

TREASURER:

Well, I just think we are getting way ahead of ourselves…

ELLIOTT:

Well, we are not really. If it is not going to be done in the next Budget, that’s the next six months, nothing is going to change.

TREASURER:

Well, I tend not to pre-judge these things, Tom. I think where we are right now…

ELLIOTT:

What would you like to do?

TREASURER:

What I would like to do right now is to be able to take people with me on this argument, this discussion which says if we change the tax system you can be better off. We want to change the tax system not because the politicians want to increase the tax burden on Australians…

ELLIOTT:

But you have to lead people a bit. There are 101 things that you could change about taxes. I mean I have dozens of ideas.

TREASURER:

Yeah, but that’s just an accountant’s picnic discussion.

ELLIOTT:

Well, of course it is.

TREASURER:

Where everyone talks about this rate and that rate and frankly it’s tedious.

ELLIOTT:

Well, ok, but you’re the Treasurer, are you going to pick the top two or three or four things that need to be done and say to us, I have looked at all this this is what needs to be done and we are going to run in the election or are you going to announce it on Budget night? What is the idea here?

TREASURER:

Well, the ideal is that you are able to do all of those things. I think once the Australian people can appreciate why you want to change it. We have got to talk a lot more about…

ELLIOTT:

So, you are going to set out the case first?

TREASURER:

Exactly, we are going to talk about why you need to do this and I don’t think people at the moment are convinced why you need to do it. And why I am saying you need to do it is because our tax system currently is penalising Australians because if you are on an average wage in this country you are going to be on the second highest tax rate next year. Now that is just crazy.

ELLIOTT:

Can we say that in a year’s time there will be a solution to bracket creep, particularly for middle income earners?

TREASURER:

Well in a year’s time I am happy to come back and we can talk about what has occurred in the meantime.

ELLIOTT:

Great

TREASURER:

And hopefully a bit sooner than that we will talk.

ELLIOTT:

I would like to see a result – less talk and more action. The Trans-Pacific Partnership, we have already got Free Trade Agreements with the Unites States, with Japan, with China most recently and I think that is going to be a great legacy of this Government whatever happens from this point but a lot of people struggle a bit with this. Now, what we can now have, I believe, with the 12 nations who have signed the Trans-Pacific Partnership is a series of mutual free trade agreements between a wide range of Pacific-rim countries but what is it going to do for the average Australian? I look at it and I can say well if trade increases we will probably all be better off – how do you sell it?

TREASURER:

Well, I was sort of referring to this before, as a country we need to earn more. We are going to earn more by doing more trade overseas. We are a trading economy – that is what we are. We are not some isolated island here which is disconnected from the rest of the world. Sometimes, with everything that is happening around the world, I can understand why people might want to jump in the bed and pull the doona over their head but that is not the way to run our economy. It has to reach out, it has to embrace the opportunities that are out there and Andrew Robb has now done that on four massive trade deals which will boost Australia’s earning capacity, open up new business opportunities and most importantly underpin jobs in this country. I call on the Opposition to get behind this, stop sitting on the fence when it comes to these trade deals, they know it is the right thing to do to unshackle themselves from the union campaigns on this and get on board for the jobs that these very important agreements will deliver.

ELLIOTT:

Very quickly, the ACTU seems convinced that this will open the door to thousands of foreign workers coming here and undercutting Australian workers. This has been a fear of Australians going back more than a century. Will the TPP allow that?

TREASURER:

No, it barely even deals with any of those issues at all and let me just say on 457s, the number of 457s being handed out today in Australia is less than when Labor left power. The number of electricians coming here on 457s today is far less than it was when Labor was in government. I mean this is just one of those pathetic scare campaigns where the unions are trying to scare Australians into poverty with this sort of approach to policy and Bill Shorten should disown it and just get on board with the prosperity objectives and policies. Now, he has raised a policy idea today - we haven’t dismissed it. I think focussing on infrastructure is a good thing. We have questions about how he is actually going to implement that – and Labor’s track record when it comes to implementation of policy is pretty ordinary. But I think it is time that we get past this combative phase in Australian politics and engage on the things that are going to grow our economy and our trade agreements are certainly going to do that.

ELLIOTT:

Final question, now former Federal President of the Liberal Party, Brian Loughnane, has just resigned. Of course he is the husband of Tony Abbott’s former chief adviser Peta Credlin. Is this part of a bit of a clean out from the previous administration?

TREASURER:

I have known Brian for a very long period of time. We worked together when I was the State Director of New South Wales, he was the State Director in Victoria. So, we have known each other for many years. He has been one of the finest servants of the Liberal Party that you will ever hope to find. He has been a dedicated professional whom the Party has relied on over a very, very long time.

ELLIOTT:

And now he has gone.

TREASURER:

I want to thank Brian. He has been in the job 12 years – that is a record. That is going well over and above the call of duty and I wish him and Peta all the best. He has been a great servant of our Party and he is a very decent man.

ELLIOTT:

Scott Morrison, you have got a lot on your plate. Thank you very much for your time.

TREASURER:

Thanks, Tom. Thanks for your time.