16 October 2015
Transcript - #2015018, 2015

Press conference, Sydney

SUBJECTS: Council on Federal Financial Relations; providing real opportunities for Australians who want to work, save and invest; free trade agreements; immigration portfolio

TREASURER:

Well today was a very positive meeting, a very optimistic meeting of state and territory Treasurers with the Commonwealth and I want to thank all of the Treasurers for their very engaged participation over the course of last night and today as we worked through what are the critical issues facing our nation as we seek to further grow our economy and jobs.

As state and Commonwealth Treasurers we have one primary goal and that is to grow our economy and to grow jobs. This is what we share in common. Where there may be differences between governments of different political persuasions, the one thing we all share is we know we must grow our economy to support jobs in the economy and support the economic aspirations of Australians, and that was very much as, if you like, the board of directors of growing the economy in this country. Together we are shareholders in ensuring that we are doing the things we need to do at state, territory and federal level and indeed local for that matter, to ensure economic growth remains our top priority.

And that means embracing an agenda. As we discussed matters, everything from tax issues to infrastructure, to ensuring a greater choice and competition and effectiveness and efficiency and service delivery so our constituents, our taxpayers, are getting the value for money that they are seeking from all of us as we are stewards of the funds that they provide and generously do so.

Innovation is also key in this process and I particularly welcome the acknowledgement by state and territory Treasurers of the importance of innovation and policies that support innovation to grow our economy and I commend them for the initiatives that they are taking on their part as well. We are doing all of this and seeking to grow our economies in the midst of many challenges but I think also many opportunities and I think today there was another opportunity for us all to acknowledge both of these, and yes of course there is volatility and uncertainty in elements of the global economy, but Australia is well positioned.

The challenges are very real, and we are not in any sense of lacking understanding of the complexity of those challenges, but nor are we intimidated by them. We are encouraged and we are optimistic about the things that we can all do collectively to grow our economy and jobs at this time. Now, it is true that commodity prices and things of this nature don't present the same opportunities that they used to, but what that does, is, I think, underscores our need to focus on how we can further unleash the potential of Australians and Australian businesses in our economy. The productivity challenges that we have are now, without doubt, the most important thing we must collectively address. That is where the jobs are coming from. That is where the growth in real wages will come from. That is where the increases in revenues that are necessary to support the many services that are delivered particularly at a state and territory level, that's where it will come from, in engaging in the process of changes that will boost our productivity which at the end of the day means allowing Australians to realise their full potential. And that's what we focused on together today.

In this environment, when you are dealing with these challenges, you can't limit your options and I want to thank Treasurers today for their commitment to continue to work together to identify all the options that are available and to work together collaboratively to find which are the best options to go forward, and today was really an opportunity to advance a national partnership on growing the economy and growing jobs, to establish a platform nationally together collaboratively to grow our economy and to grow jobs. Particularly today there were a number of items that were up for discussion. We continue the discussion on how we can work our tax system at a federal and state level so it can support Australians in their aspirations to work, save and invest, which will encourage growth in our economy and jobs.

Today, in response to the request from states and territories at the last meeting, there was a discussion of options and parameters that would deal with changes to federal taxes. There was no proposals put forward by the Commonwealth today, I want to stress. This was a request for information on options and it is part of the discovery process, I would say, that we are going through in relation to the tax system. It was noted that at our next meeting we would continue that discovery process by looking at all the various options that exist at a state and territory level. That is in no way to suggest that states or territories have been not acting in ways that they should in relation to these matters. Every state and territory jurisdiction, I am confident, will be looking at their state tax bases to ensure they are doing everything they can to make sure they are as efficient and effective as they can be, as is the Commonwealth. In the same way that we have identified and looked at options today, without any decision, without any requirement for a decision, we will now look at what those options are at a state and territory level because we are looking for the best mix of options that are going to encourage jobs growth and economic growth in this country.

Secondly, we focused on the Harper report and the Harper Review. The Harper Review has the potential to unlock, if acted upon, enormous economic opportunities for Australia, not unlike what was achieved when we realised 2.5 per cent growth by implementing the Hilmer reforms many years ago. The agenda has moved on and while there are some outstanding issues in energy and water and utilities from pervious times these remain a few outstanding matters of work to be done. The real agenda though, which has opened up and identified in Harper really deals with the area of how we could provide greater choice to Australians who are seeking, as Professor Harper said in his report, more services in more areas and they are going to seek those from an economy, not just governments to provide. We need to be looking at ways to open up the opportunity for new service offerings and more efficient and effective ways at the end of the day to provide and meet the expectation of Australians in a very different world, where we have an ageing population and reforms such as the National Disability Insurance Scheme and things of that nature, I think are really changing the way Australians feel, about how they can engage in the area of social services.

Social services and human services have always been important social responsibilities of government and will always remain so. What is opening up now is that these areas of service delivery have also got a very significant economic component to them and provide very real job growth opportunities in this country where we have a competitive edge and the recent free trade agreements, I think, have very much reflected that.

So states and territories want to work together with the Commonwealth to identify how we can make the best of those opportunities, while retaining our absolute commitment to issues such as universal access and equity and fairness and the effectiveness of delivery of these very important services that Australians will always rely on.

Critical amongst those and an issue that was not specifically identified necessarily in Harper was the issue of housing. Now, it is true that the Harper Review did focus on the issues relating to land use planning and zoning and things of that nature as an important area of economic reform. We will obviously continue to look at those issues, as states and territories already are. But the issue of social housing delivery and support and affordable housing which was discussed at the last leader's meeting as part of the Federation Review Green Paper, this is another area that there was keen interest in today from treasurers.

Around $11 billion a year is spent on housing support and assistance at a state and territory and federal level and we can do a lot better right across that area – a lot better. We are working off very archaic models but amongst that there are green shoots of innovation and service delivery which are occurring in many jurisdictions and we want to continue to roll out that discussion and work together.

So, the next step on Harper is for the Government to make a formal response to the Harper Review. Today I've been able to get, I think, a very good indication of the willingness and appetite of the states and territories to engage in that process and it is for us now, I think, to start charting out options on the institutional framework for how that can be driven, in the same way that that was driven back under the Hilmer process of competition policy. This is an exciting area but it's very early stages. There are some key principles to work off and we will seek to flesh those out to ensure at our next meeting we have something a bit more concrete to consider about how that process can be managed.

Having said that, some states and territories have already made some significant advances in these areas; others are already looking at changes in these areas and the institutional arrangements we put in place need to reflect the relativities between the states. All of this adds up at the end of the day to a national platform for economic growth and jobs. That's what we're working on together. That is our core business, that is our mission and it is a mission that we are locked together on, and we know that that is the way that we can deliver both in terms of the service delivery expectations that Australians have, of all levels of government, but importantly that is what is necessary to ensure we can support the jobs and the economic futures of Australians.

QUESTION:

[inaudible] request information on options on federal tax, are you talking about GST?

TREASURER:

We're talking about the plethora of options that exist at the federal level. There are certainly the ones you've mentioned but also the issues that states have raised around increasing the Medicare levy. I think people know my views on those but we are in the environment that we are just identifying options at the moment. No states or territories or the Commonwealth are being drawn on any of these issues at the moment, because we are in the discovery phase and I think that's a very positive thing. I think Australians would expect us to work methodically through what all the options are, because at the end of the day this is about ensuring that Australians have a strong economy and a strong economy that's producing jobs and producing the revenue that is necessary to deliver important services.

QUESTION:

So, do you think the GST is distributed fairly, or do changes need to be made to the formula?

TREASURER:

Well, we're still in the discovery phase, we're just looking at all the options collectively. In these processes I take these steps one at a time and we're in that phase of the discussion at the moment and I think it would be premature to consider anything beyond that.

QUESTION:

Were there any new options tax-wise raised or put on the table that we may not have heard about?

TREASURER:

At the next meeting we will be looking at a range of options that can exist at the state and territory level and the Commonwealth Treasury will be working with the state and territory Treasuries to identify what those are. Again, these aren't proposals, these are just an inventory of the various options that can be considered. Because Australians, I think, would expect us to work through all of that. Changing the tax system isn't about one or two taxes. You have to look at the overall mix of taxes. You have to look at how that integrates with the payments system also at a federal level. You would have noted a statement I issued yesterday with the Social Services Minister which is looking at the interface between the payments and the tax system.

QUESTION:

So, just to clarify, are state and territory Treasurers being asked to come to the next meeting with ideas, options for tax changes or reforms at their particular level?

TREASURER:

The discovery process is one that the Commonwealth Treasury will continue to lead and it will work with the state and territory Treasuries to just simply develop an itemised list of options that exist. There is nothing attached to any of those lists. It is simply to ensure that we are able to have the universe of options that are available to states and territories, because this isn't just about what happens at a Commonwealth level, it's about what happens at a state and territory level as well and we need to bring those two parts of the process together.

QUESTION:

So, when can we expect a formal response to the Harper Review? When can we see some action following on from this discovery phase?

TREASURER:

On the Murray Review I'd be looking to now move that forward over the next few weeks and with Cabinet meeting between now and Christmas, well, I will look to a timetable that would see that to be able to be presented hopefully before Christmas, but we have today only really, I think, enabled ourselves to reboot that process. On the Harper Review, it's an outstanding report and in many ways it's been overshadowed by just one recommendation regarding Section 46 which is a very important recommendation and I'll continue to consult with the various groups and interests that relate to that particular proposal and where we land on that issue, well, I'm not going to be drawn on a timetable on it. The broader more fundamental reforms that are proposed in the Harper Review, I think, you can expect the Government to have a very enthusiastic response to and I was encouraged by the state and territory Treasurers today about their willingness to engage in that type of process.

QUESTION:

And the broader tax system?

TREASURER:

This is a step-by-step process. There have been so many reviews in the past which have just ended nowhere and plenty of discussions which have just gone into dead ends and I have no intention of ending in a dead end on this issue. What I have an intention of is working collaboratively with the state and territories, but even more importantly together, talking to the Australian people about how this can work better for them. If we can't make that case as to why this is better for Australians, that it's going to better serve them and their jobs and the economic certainty and stability that they're looking for, well it's not a very convincing argument. So we will take the time to engage Australians on that and collaboratively what we are doing is we're saying changing the tax system is actually not an end in itself, it's actually part of establishing a national platform for economic growth and jobs. That's what the debate is actually about. It's about how we grow jobs in the economy and how we work together to change the tax system to support that outcome. That's really what the debate's about. I was pleased today that it was confirmed in my mind with the states and territories that that's what they're on about too.

QUESTION:

WA's Treasurer says that you support that state's campaign for a fairer share of tax revenue. So have you been trying to get the other states to agree?

TREASURER:

That is a process which is not set by the Commonwealth. As you know that's set through the Grants Commission. What I have said on that matter is what I said at the time, that there was a fairly perverse outcome. I think everyone acknowledges that in terms of where Western Australia landed as a result of that. I don't think that outcome would ever have been envisaged by those who put the original arrangements together. I think it's a statement of the obvious that you'd be sympathetic to those sorts of outcomes not being repeated. I'll be meeting again later today with Mike and I'm sure those issues will come up and I think it's just a common sense position, frankly, that the outcome that resulted on that occasion was well wide of what anyone would have thought was a fair deal.

QUESTION:

Treasurer, the New South Wales Treasurer has said that at her last Budget that she was going to continue to lobby the Commonwealth to reinstate the cuts to health and education funding that were revealed in Mr Hockey's first Budget. Has that been the case today, has Gladys Berejiklian put that to you today?

TREASURER:

All the state and territories will make their cases about the various pressures on their budgets and the Commonwealth makes a similar case. In this country over the course of the Budget and forward estimates we will begin the full funded aspects of the NDIS. Now, what that is, is a one-third increase in the amount that we are spending as a nation on disabilities in this country and I think that's a worthy change, but it's an expensive change. At present, there's around a $5 billion plus gap in what has actually been achieved in savings and what has been provided for by the levy to ensure that that expenditure is offset within the Budget. We all have pressures on our budget. States and territories have them. Some of those states are actually moving into surplus, many of them, and that's a very worthy objective. We all have to make the decisions about our budgets that are necessary to support the demands placed upon them. What we were talking about today was how do we deal with tax system changes, reforms and improvements to how we deliver services and the efficiency effectiveness of that, which relates to Harper which I think overall does improve the budget position. So, the answer to the issues of pressures on all of our budgets, I think, is to work together to ensure we have a better tax system which will grow the economy and support all of our revenue bases.

QUESTION:

As a former Immigration Minister do you think that New Zealanders should get special treatment under Australia's immigration…

TREASURER:

Before we come to immigration, anything else on the economy?

QUESTION:

Innovation, it seems to be a thing with both sides of politics. What exactly does it mean on the state level? What did you discuss today on that [inaudible]?

TREASURER:

Well, that really goes to the heart, I think, of what we're looking at in service delivery under the Harper Review reforms. It's not for the Commonwealth to be prescriptive about how each state and territory will respond to the areas of opportunity identified in Harper. The Harper Review does identify a range of existing quite innovative arrangements whether it's in health or different areas, say in Western Australia or New South Wales for that matter, where some really positive things are happening. It's really about the innovation in service delivery and the different models that are available that equally meet the public test of access and equity and quality which are important in any area of service delivery. The efficiencies that are achieved there can spark whole new areas of business for Australia and whole new trading opportunities which are set out by the free trade agreements. So, the innovation agenda exists in the public sector, it exists in the not for profit sector, it exists in the housing sector. We had a discussion today about social impact investment and how the states and Commonwealth can work more closely together on issues like social impact bonds which some of you will know is a keen passion of mine. I think we can do a lot better in that area as well. Innovation is our competitive advantage going forward. It is what we will need to replace at the end of the day what is no longer there in the same strength on commodity prices and our terms of trade. So, productivity, innovation, agility – all of these things –unlocking the potential that Australians have, is the way we will grow economies in the future and we back them on that. Absolutely we back Australians on that. We're not going to be like the Opposition. We're not going to be intimidated by the challenges. We're not going to allow the Opposition to scare people out of their future prosperity by ruling out and limiting the options before us and I'm pleased that the state and territory Treasurers aren't going to be intimidated by that sort of negative, and frankly, old politics approach that we are seeing from the Opposition.

QUESTION:

Can you outline some of the practical ideas in terms of innovation? Innovation can mean many things [inaudible]?

TREASURER:

At the end of the day it's about having services that provide people more choice. Particularly I'd say as people are moving into retirement phase. We have an ageing population. We've got digital transformations that are taking place which can very much lend themselves to service delivery to people in the retirement phase and it's not just about the Government cheque which is provided to you for the services you're going to buy, a la what's happening with consumer-directed care and age care through the NDIS, it's what service offerings are that are going to be behind that and how we see those markets open up. The NDIS is really going to unlock a new area of service delivery in this country which principally before been has been run by a very small club of those who control the flow of money and cheques. People who have disabilities or people moving into the retirement phase or are ageing through the course of their life are going to be able to demand and receive new services and we need to be able to open up the competition there which will see that come to fruition. So, it's a very exciting period of time.

One more on economics and then we will go to immigration.

QUESTION:

Can you speak more about the green shoots that you mentioned about housing support? And secondly aren't rising interest rates a positive for housing affordability if it pushes prices down? You were critical of Westpac's rate hike.

TREASURER:

The one area of interest rates rising which I think you could welcome was for depositors. I think all self-funded retirees and others in the retirement phase which saw the lift in Westpac's deposit rate for term deposits would welcome that. But I don't propose to get into a commentary on Westpac on this. I've made some comments on that issue and I'm happy to leave them where they are. The advice that I have suggests that Westpac has made a series of commercial decisions which they are more than entitled to make and I'll leave them to explain those to their mortgage holders.

The issue in housing affordability when it comes to buying houses is actually about supply. We did talk about that today. The Victorian Treasurer brought back a report on what was happening in the area of housing supply. We're already seeing some of the fruits of what has happened at a state and territory level with the record levels of approvals and things of that nature in the residential market which is seeing more supply come on-line which should ease pressures on housing affordability. But housing affordability is just not about purchase affordability. Thirty per cent of people in this country rent – they rent – and rental affordability matters. We've got 5 per cent of households in this country who live in social housing. That matters as well and how we're delivering services and support and assistance, whether it's in Commonwealth rental assistance or public housing or affordable housing or community housing, this is an area of service delivery at the state and territory level which has had some green shoots – social impact bonds with Common Ground in South Australia, similar issues being looked at here in New South Wales, these are good developments but they're still very much on the margin. Eleven billion dollars every year, every year, and I don't think any of us as Treasurers could put our hand on our heart saying that is delivering the job that we so passionately want to see it deliver.

QUESTION:

[Inaudible]?

TREASURER:

No, I don't believe it has to. I think we can spend $11 billion much, much, much better when it comes to housing assistance, and the Commonwealth is very open to how that can be done. More than half of that housing assistance of that $11 billion is provided by the Commonwealth, not the states and territories. The Commonwealth spends more on housing assistance than the states and territories combined. This is an area that has failed to lock together, whether it's CRA, public housing, affordable housing initiatives, homelessness issues – this is an agenda where I think we can make some good change, but I'm not expecting results overnight. It's about transforming a system that's largely been running the same way for a century.

QUESTION:

So, Mr Morrison, do you think it's fair that if New Zealanders have spent almost their whole lives here, that they could be deported if they've broken the law?

TREASURER:

The Prime Minister will be obviously having further discussions with the Prime Minister of New Zealand as you'd expect him to do and as a Minister for Immigration there were many occasions where I cancelled visas that were in these circumstances and that's what our law provides for. I think we have to strike the right sort of balance when you consider these matters, which when I was Immigration Minister were ministerial intervention cases largely or character case considerations. You would look at the mix of factors that were relevant and it is possible under the laws that we introduced when I was Minister for the now Minister to exempt automatic cancellations in these cases, as well. You've got to look at the mix of factors of the individual case and that's what the law actually provides for. But at the end of the day, if you're here on a visa and you've committed sexual assault, if you're a gangster, if you're a bikie gang member, if you've engaged in physical assault or murder or something like that, you've worn out your welcome in this country. I don't care how long you've been here. You've worn out your welcome if you're here on a visa. The same is true for Australians overseas who commit these sorts of crimes and offend the countries in which they may be living. They will be sent back to Australia if they've done that. So, you need to get the right sort of balance in this area, but we should never apologise for the fact that if you're not a citizen, if you're here on a visa, then you're here at the good graces of the Australian people and you abide by our rules, you abide by our laws, or you face getting sent back.

QUESTION:

Do you think some consideration needs to be given to this unique relationship that we've got with New Zealand?

TREASURER:

New Zealand has a different immigration relationship than any other country. That's a fact, because there is the ability for New Zealanders to enter Australia and to be in Australia as there is for Australians to enter New Zealand and they can work and they can do all of these things. They can't access welfare benefits. It was the Howard Government that put an end to that, which basically ended the welfare migration from New Zealand to Australia a long time ago and they should be commended for doing that. Yes, there is free movement between New Zealand and Australia, but as a rule, general principle, if you take advantage of those liberties by coming and living in Australia, if you abuse that privilege, then you should have no expectation that you'd be able to stay, particularly when we're talking about pretty serious offences. As Minister for Immigration I saw some very grisly cases – sexual abuse of children, I mean do you think they should stay? No, I don't think they should.

Thank you.