21 February 2018
Transcript - #2018015, 2018

Interview with Neil Mitchell, 3AW

SUBJECTS: Immigration, corporate tax cuts, petrol prices

NEIL MITCHELL:

Scott Morrison, good morning.

TREASURER:

Good morning, Neil. Good to be here in Melbourne.

MITCHELL:

Thank you for coming in. I want to play you something that your former boss, Tony Abbott, said last night about immigration:

[EXCERPT PLAYS]

TONY ABBOTT:

My issue is not immigration. It's the rate of immigration at a time of stagnant wages, clogged infrastructure, soaring house prices and in Melbourne, at least, every gang is testing the resolve of police.

MITCHELL:

Okay, the roads are clogged, wages are low, house prices are high and gangs are rampant because of immigration levels. Is he right?

TREASURER:

I think a lot of the things that he referred to we're seeing happen but to tie that back to the level of permanent immigration in the country is a separate issue…

MITCHELL:

So you think he's wrong on that?

TREASURER:

Let's think it through. I can understand why people would be superficially attracted to this idea that if you lower the level of permanent immigration that that will have that impact, but let's think it through. The level of permanent immigration to Australia actually hasn't changed since about 2011 so when I was Immigration Minister and Tony Abbott was Prime Minister – as the same as it was today – in fact, the level of permanent immigration to Australia, when it increased most, it doubled under John Howard. He actually doubled the rate of permanent immigration to Australia.

MITCHELL:

So when you were Minister it was about 180,000 to 190,000?

TREASURER:

Yeah, that's right and that's remained at that level and importantly, two thirds of that was skilled migration so if you take this proposal, this is what it means. You'd have to drop it by 80,000, the hit to the Budget of that would be about $4 billion to $5 billion over the next four years…

MITCHELL:

What's that? Income tax?

TREASURER:

It's revenues and broader impacts on how it's modelled through the economy, so it's about $4 billion to $5 billion you'd have to find. On top of that, the proportion of the permanent intake that would be skills would fall. So you'd have more of your intake because the family component is fairly fixed. It's partners, it's predominantly partners of Australians. So are you going to say to partners that they can't come to Australia and they're married to an Australian? So, the number of people who come under the skills program would actually fall proportionally, and they're the people who are actually paying taxes, having jobs, contributing to the economy. The reason that the population growth rate has gone up more recently hasn't actually been because of the permanent intake, it's been by what I call the 'variable intake'. And so, we've had more students, we've had a rebound in the number of students that are coming to Australia. Your backpacker numbers, visitor numbers have been increasing as well, and some of those feed into the population numbers, and so what we've done as a Government is address some of those issues. We've got lower numbers of 457s now coming in, we've increased the waiting times for people to get welfare so if there are welfare immigrants coming that they're not going to come under this Government because we're extending the waiting times, and we've introduced broader reforms into the temporary migration program which has ensured that we're getting that under control. So that's the thing you've got to manage, it's not the permanent intake.

MITCHELL:

I accept that it's been under 180,000 to 190,000 for some time but the argument – and I think that's what Tony Abbott's putting – is because of that level, we're now looking at infrastructure like roads being overloaded, lower wages, gangs, etcetera. Is that not a reasonable argument? Okay, because we've been at 190,000 for a long time doesn't mean we keep it there. We either freeze it or reduce it.

TREASURER:

The last people that did that was under the Hawke-Keating Government and that occurred at the same time that we were having recessions in this country, and a lot of our immigration in this country is demand driven and so when you're economy's doing well then that requires more people and more people come under our skilled program because remember our skilled program is designed that you need to have skills that we have a shortage of and that's why that program performs more strongly in times of growth. So part of the problem is our economy is doing much better than it was, but interestingly, the number of 457s that have been coming under this Government is lower than it was under Bill Shorten when the unemployment queues were longer.

MITCHELL:

You said about it bringing $4.4 billion to $5 billion in revenue for the Government. What are the outgoings?

TREASURER:

That's netted off. The underlying cash balance would be impacted to the tune of about $4 billion to $5 billion from that sort of a structural change to the permanent intake to Australia so I understand the – the answer is to manage population growth through the things we are already doing, particularly in the area of managing the way that we deal with temporary migration to Australia, that's the thing that has really been the balancing factor which has driven population growth up, particularly in the last 12 months and because of the measures we've taken, I would expect that to moderate, but a permanent cut to the permanent intake, it's very hard to look at the data and see that that's actually the problem.

MITCHELL:

What about social impact? And that's what he's touching on with the gangs.

TREASURER:

If the suggestion is that immigrants cause crime, well, I don't know if I agree with that because if you look at the figures, the level of unemployment amongst migrants who come to Australia is no greater – in fact, in many cases, it's less – and when you go to second generation as many people in this city would know, the educational attainment level of the children of migrants is higher than the broader population. The real issue here is that when wages are flat and when people are feeling the pinch, people will line others up for being the reason for this. I think you've got to have sensible, skills-based, tight migration policies based on skills with strong borders. That's what I implemented as Immigration Minister under Tony Abbott and that's what we're continuing to implement under Malcolm Turnbull with Peter Dutton.

MITCHELL:

We are agreed that people are feeling the pinch…

TREASURER:

Absolutely.

MITCHELL:

Okay. Has immigration got anything to do with that?

TREASURER:

No, if anything it's supported growth in the economy over the last five years in particular when the world has been in a much more suppressed state, and if that hadn't been in place over the last four or five years I suspect that people would have been feeling the pinch more.

MITCHELL:

Hello, Cole. Go ahead, Cole.

CALLER:

Fuel and electricity is the worst two here. You've got the Government giving the gas away for virtually nothing overseas? You get charged 84 cents a litre over here and electricity has gone through the roof and they're doing nothing about it, I reckon they're in bed with them.

MITCHELL:

And there's a percentage of tax on fuel that's keeping it high, Treasurer?

TREASURER:

Particularly on energy, we agree and that's why there's a couple of things that we're already doing on energy. People would know what we did last year with the big gas companies to ensure that we increase the gas supply for this year and that's had a direct effect on wholesale gas prices, but the other thing is, here in Victoria, they've locked up the gas. They've completely locked it up. You want to know why you're paying more for electricity in Victoria? It's because the Victorian State Government is locking up the gas. I was in Texas three weeks ago, their electricity prices are about a third to a half of what they are in Australia and you know why? They've got heaps of gas and here in Victoria, the lock up on gas – I'm not just talking about unconventional, I'm talking about the ban on conventional gas – is pushing your electricity prices up in Victoria.

MITCHELL:

Any chance of some tax relief on petrol? Or do you need it too much?

TREASURER:

That's not an issue the Government has been looking at, what we have been doing in petrol, in particular, is the ACCC has now got additional powers to not just go after what's happening at the bowser but we gave them the powers to go behind the bowser and look what's happening with the pricing practices of the companies themselves. Now, they only just got those powers on 1 January this year, Neil, so I'm going to give them the time to let that work its way through. One thing I've got to say, I was really impressed with over the break – I just saw the ad on telly – the innovation that is occurring where you've got that 7-11 product now, that wasn't the Government that did that, that was the company. You can lock in a lower price on an app – if it's a low price on Tuesday, you can go to the 7-11 shop on the Saturday and get it at the same price and if it's lower, you can get it for less. Now, I'm not running an ad for 7-11, I just thought it was a good market innovation.

MITCHELL:

But what percentage of a litre goes in tax?

TREASURER:

I couldn't tell you off the top of my head, Neil.

MITCHELL:

We could find out.

TREASURER:

Yeah, we could get that for you.

MITCHELL:

It's very high. Very high. Are you so reliant on petrol that you can't allow some tax relief which would bring the price down?

TREASURER:

The movement in prices in petrol aren't driven by the tax. The volatility in prices…

MITCHELL:

No, but the high price is…

TREASURER:

No, no, you get a 30 cent movement – you can get a 30 cent movement in the price of petrol in a week. In a couple of days…

MITCHELL:

It's starting from a higher price because you're taking so much tax out of it.

TREASURER:

But to completely remove the tax on petrol, well, you would have to understand what that would mean for the Budget…

MITCHELL:

Not completely remove it but John Howard addressed indexation to try and keep prices down.

TREASURER:

Well, he did and if you were to move it by a half per cent, you're still going to get those other fluctuations which is what I think really drives people crazy and the thing that actually gets that down is more competition, more information and like the apps that I've just talked about, I think that's helping people hunt out the better deal.

MITCHELL:

Margaret. Hello, Margaret.

CALLER:

Hello, Neil. Hello, Mr Morrison.

TREASURER:

Hi, Margaret.

CALLER:

I realise that the previous caller spoke about petrol prices but really it's terrible and the one that puts the prices up in the beginning is Coles. They've put it up first and United is one that keeps it down until the last minute but there's got to be something that could be done about that. I was in a taxi yesterday and I have to take taxis because I'm getting over a broken neck…

TREASURER:

Oh my goodness, sorry.

CALLER:

That's okay. Thank you. And they're trying to make a living and then next thing, prices are up. It's really hard on the family…

MITCHELL:

Thank you for that, Margaret. Part of what we've been talking about for many years is to stop gouging and we had a petrol commissioner, he was Kevin Rudd's man, wasn't he?

TREASURER:

I don't think that did much. The ACCC have those powers and it's an area where Rod Sims at the ACCC spends a lot of attention and he came to us last year and said, "Look, one of the problems I've got is I've got the powers to deal with what's happening at the bowser and I then particularly look at what's happening to regional areas where there was some real gouging going on in particular – places we've got under control." But he said, "It's really what happens behind the bowser back in the head office and I need the powers to go and check that out." And so we gave those powers to him at the beginning of this year.

MITCHELL:

A couple of things I know you let get away…

TREASURER:

No, we're good.

MITCHELL:

The wage relief. The Prime Minister has been telling me for more than a year that wages are falling behind, they're falling behind. When can people hope to catch up?

TREASURER:

As the labour market continues to tighten. We're already seeing that in some sectors. I'll give you an example, in some of the health sector, we've got the wage growth running at about 2.7 per cent – now, that's higher than the average which is around two per cent. So in some sectors, we're already seeing – in the construction sector as well where that real pressure is coming on and people are finding it harder to get workers then we are seeing in some sectors that happen. Now, Phil Lowe, the Governor of the Reserve Bank, has made the same point. The laws of supply and demand haven't been suspended and as we continue to see that strong growth in our labour market – remember last year, 403,000 jobs – there's never been a stronger year in jobs last year. That contributes to building up the pressure for that wage growth to come.

MITCHELL:

In your opinion, what is a liveable wage?

TREASURER:

It depends on your circumstances, Neil.

MITCHELL:

Family, couple of kids, mum and dad.

TREASURER:

I think it's tough for everyone these days and everybody would like to have a bigger wage – particularly those…

MITCHELL:

The minimum wage is $695…

TREASURER:

Particularly those on middle incomes and that's why they're my strong focus as we go into this Budget.

MITCHELL:

They're a focus ahead of that minimum wage earner – $695 for a 38 hour week, I couldn't live on that.

TREASURER:

No, look, it would be tough to live on the minimum wage, it would be tough to live on the pension too, Neil. I agree with both of those statements and that's why we're so focused on getting people into work where they can be earning better wages and we can have more and better paid jobs and one of the ways we're seeking to do that as you know is to ensure that we deliver tax relief to the Australian economy – particularly for businesses and the Labor party is standing in the way of a wage rise and Australian workers by opposing that plan.

MITCHELL:

So, I wanted to get to that. Your tax cuts for business, you say will bring pay rises to staff?

TREASURER:

Yes, that's one of the many impacts that will flow from that and it's not just me that's said it, the businesses themselves have said it.

MITCHELL:

So in a sense, we would as taxpayers be subsidising the pay rise?

TREASURER:

No, we'd be ensuring that businesses get to keep more of what they earn…

MITCHELL:

Yeah, and that's tax money.

TREASURER:

No, it's their money. It's their money, Neil.

MITCHELL:

Yes, so is my money but you take half of it.

TREASURER:

Yes, and I'd like to give some of it back to you. We're the Government that delivers tax cuts, not tax increases.

MITCHELL:

Okay, so the big businesses are a priority ahead of wage earners?

TREASURER:

No.

MITCHELL:

Wage earners first?

TREASURER:

I've said this I don't know how many times now. If you're on a middle income, you will see a reduction in your tax before big companies will. The big company tax changes don't occur for six years…

MITCHELL:

And what if I'm a small business?

TREASURER:

You've already got it. And you'll get more.

MITCHELL:

Under $50 million?

TREASURER:

Yes, you've already got it and worse than that, the Labor party will reverse it. They will cut those tax cuts out if they're elected. It's factored into their Budget.

MITCHELL:

One third of companies pay no tax, why can't we fix that?

TREASURER:

That would mean they're not making any profits, Neil.

MITCHELL:

Except 732 of them. They're really not making any profits or is it a form of accounting cleverness?

TREASURER:

No, we've already cracked down with the toughest Multi-national Anti-Avoidance Laws, some $7 billion of extra income has been recognised by the Tax Office because of our tougher laws that Labor voted against…

MITCHELL:

Do you really believe that one third of companies are not making any profit and, therefore, paying no tax?

TREASURER:

Well, let me say this…

MITCHELL:

732…

TREASURER:

The gross operating surplus in the national accounts – sorry to get sort of nerdy on you for a sec – but that's the company profits figure in the national accounts. For five straight years, that went backwards for company profits under the gross operating surplus in this country, and wages only raised marginally over that period but they rose over six years, more than six times faster, than company profits. Now, companies have been digging deep into their own pockets, going backwards in many cases, small businesses digging in their own pockets to keep their employees in work – even to achieve the modest wage increases that they have had. A profit for a small business is called a wage for the owner of that business and there are millions of them out there and we've given them tax relief already which Labor will strip away and what we're now saying is, "How can you expect companies to pay workers more when I insist on them paying me more as the Treasurer?" I don't think they should be paying me more, they should be investing more in their business, more in their staff and taking the big opportunities that are out there for the Australian economy this year.

MITCHELL:

Are you concerned, if interest rates go up, that some people will go to the wall, lose their houses?

TREASURER:

Michele Bullock from the Reserve Bank gave a very good speech yesterday…

MITCHELL:

She talks about pockets of stress.

TREASURER:

Yes, and there are, and she acknowledges that and that is true. But one of the things that has happened over the last three or four years is when interest rates fell, most householders kept paying their mortgage at around about the same rate. So they built up a buffer and that average buffer now is about two years on average and two and a half years for owner-occupiers so they've got ahead of their mortgage payments and that's been very sound that those Australians have done that. So because of the way our mortgage market works in Australia, we have built in that buffer which gives us a bit more resilience in those times and I'd add to that if you're getting a new loan now, the lending criteria on those new loans – because those have been tightened up – means that you're in a better position to meet that then perhaps previously those assessments would have suggested.

MITCHELL:

It's an obvious concern but aren't you concerned by people over-committing, believing that interest rates are going to stay at this level?

TREASURER:

That's why we have the rules on interest-only loans…

MITCHELL:

We'll have to accept that interest rates will go up, won't we?

TREASURER:

The Reserve Bank is more likely to go up then down but they've also said that they're in no hurry. The Fed in the US has risen three times last year but they were already below us and we've seen in the European Union and in the UK and other places, Japan, starting to reverse their monetary policies but they are still a long way behind where we're currently right now.

MITCHELL:

I thank you for coming in, just a final question and, Treasurer, this is a new normal. Who are you sleeping with?

TREASURER:

My wife. [LAUGHS]

MITCHELL:

But my point is that with the code of conduct – and I agree in the principle of the code of conduct – it is now relevant for journalists to pry into the sex lives of Ministers because it could cost them their job.

TREASURER:

Certainly, if it's a case of a bad workplace practice where someone is doing that with one of their staff members which is what the code says, which is about professional conduct, it's actually not about a morals police, it's about professional conduct in the workplace and some businesses have been recognising that actually for a long time.

MITCHELL:

Of course, yes.

TREASURER:

Others more recently. But beyond that, journalists and others will have to exercise their judgement about what they consider to be appropriate and not – as in what's private and what's not…

MITCHELL:

But do you agree it's changed the situation?

TREASURER:

I think it changed some time ago.

MITCHELL:

Those journalists think it didn't because everybody seems to have known about Barnaby Joyce with no one knowing a thing about it.

TREASURER:

As time goes on, I think the seal's been broken on this stuff for a while and that's as it is. I often look at how the media reports things, that's what they're responsible for and they've got to use their judgement and apply their ethics to how they do that and what they think is appropriate and if they overstep the mark there, well they're accountable for that and if politicians overstep the mark, well, they're accountable for that.

MITCHELL:

So the price for success in politics is fidelity?

TREASURER:

I'm happy to pay that price. It's served me very well.

MITCHELL:

Is the Barnaby Joyce thing finished yet? Because it's doing you a lot of damage.

TREASURER:

I have no idea. That's up to the National Party.

MITCHELL:

It could go on?

TREASURER:

It's entirely a matter for them.

MITCHELL:

Well, it is. You've got a view on it though. What do you think?

TREASURER:

I've expressed my views on it and I don't intend to repeat them. I don't think it helps. I said this on the weekend and I think I've set it out pretty clearly and it's for the National Party to make their own judgements.

MITCHELL:

It has been a distraction, hasn't it?

TREASURER:

Of course, it has. It's been a terrible distraction and that's why being here today and the Prime Minister is off to the United States today and Julie Bishop's overseas doing her own business and Peter Dutton's at the Press Club today talking about important further changes toughening up our counter-terrorism rules. The Government's getting on with the job and I want to reassure Australians about that. I understand that with all the media attention on other issues, they may think that's not occurring – and I understand that, we get that, we know it's a distraction and the distraction should end and it should be dealt with – but we're getting on with it – 403,100 jobs last year, the lowest level of welfare dependency for the working age population in 25 years, that's what we're delivering and we want to keep doing it.

MITCHELL:

And did you have some figures on petrol which you were…

TREASURER:

It's just under 41 cents a litre and on top of that, that raises about $18 billion a year so it's a fairly significant chunk of the Budget and it's been at that level for a while, it's not something we've been ramping up but at the end of the day, how we manage things like petrol prices is ensuring there's more competition, there's more technology, people are more empowered, I think the most competitive markets are ones where the consumer has the most power and that's what I'm seeking to deliver them.

MITCHELL:

Thank you for your time.

TREASURER:

Thanks, Neil, great to be here.