27 February 2018
Transcript - #2018018, 2018

Interview with Rafael Epstein, ABC Radio

Subject: Cost of living; Enterprise Tax Plan; Immigration; CFMEU

RAFAEL EPSTEIN:

Scott Morrison is Treasurer, of course, in Malcolm Turnbull’s team. Good afternoon.

TREASURER:

G’day Raf.

EPSTEIN:

Just before policy, what do you reckon is the bill at your home, that’s gone up the most recently?

TREASURER:

I would agree, it would be electricity. There is no doubt about that, and they’re the bills going back to the most recent quarters and that’s why we’ve been doing so much on that. But let me just update you on one other thing in your introduction. There’s been more recent wage data from the ones that you’ve just referenced there and that’s the December quarter Wage Price Index which actually showed that wages grew by 2.1 per cent, which is actually ahead of inflation.

EPSTEIN:

When do you think that will happen?

TREASURER:

Well that just happened. That’s the December quarter.

EPSTEIN:

Yeah but when do you think it will happen over an extensive period?

TREASURER:

You said it was actually not keeping up with inflation … the more recent information …

EPSTEIN:

Happy to concede that, people want to sort of be able to look into the next year or two, when do you think it will happen consistently?

TREASURER:

I would expect it to continue to build, because of the pressure in the labour market because 403,100 people got a job last year and we’ve had the longest run of consecutive jobs growth by month now in recorded Australian economy history. So that is putting a lot of pressure in the system and as businesses invest more, then what we know is when they do that, that is inevitably linked to increased productivity and that lifts wages, and it’s not just me saying that, the Governor of the Reserve Bank is saying that, most credible economists are saying that. So the fundamentals about what actually lifts wages sustainably, which is growth, investment, people getting jobs, shortages in the labour market, that’s what will drive wages up. It just doesn’t fall out of the sky.

EPSTEIN:

No it certainly doesn’t. How do we know that tax cuts to the biggest companies lead to higher wages?

TREASURER:

Because it always has. We’ve just seen it in the United States. It is a fairly straight forward economic orthodoxy. The rules of supply and demand have not been suspended. At the same time, it just makes sense …

EPSTEIN:

You’ve raised the United States, if I could just …

TREASURER:

Let me just make this point. If I ask businesses to pay the Government more in taxes, what’s the likelihood of them paying people more in wages? I mean the counterfactual, I think, is just a crock.

EPSTEIN:

If we can go to, you pointed to the United States, both Moody’s and a firm called [inaudible] associates reckon that about 3 per cent of that tax cuts has gone to workers and the rest of it has gone to things that the company spends on share buybacks, paying down debt, those sort of things so if the US …

TREASURER:

The estimate from the US Treasury Secretary in discussing this with the Prime Minister just recently is that when this is put out over a period of time, that around about 70 per cent will flow through in better wages, because there are many rounds of effects, it isn’t just a simple – well a tax cut was made there and an amount is immediately passed on – some of that will happen for sure, but when these companies …

EPSTEIN:

3 per cent sounds pretty low.

TREASURER:

That’s what Moody’s and others might say, the estimates we get from the United States are higher than that, but it’s not just the initial hit. It’s not done as a sugar hit. What it does is when companies invest more, they grow more, and when they do better then they obviously can pay more. There’s an indisputable link between investment in companies which lifts productivity in their workers, which leads to higher wages. The Treasury did an outstanding piece of work on this last year, which I released towards the end of last year and I gave a fairly long speech about it in September which your listeners can get access to on my website, but if you get businesses to invest more, that’s what drives their improved performance which is what lifts wages. A company that’s not making profits, can’t lift wages.

EPSTEIN:

That gets criticised as trickle-down economics though Scott Morrison, if the money ….

TREASURER:

Do you agree with them?

EPSTEIN:

No, but don’t you need to point to real world examples?

TREASURER:

I did.

EPSTEIN:

My question would be, do you get Treasury here to look at the Treasury verdict in the United States, other than just the Treasury Secretary there saying it, do you …

TREASURER:

I’ve had the same advice from my own Treasury which said this does flow through. On their own estimates on our plan, it lifts the size of the economy by $20 billion. That’s on our plan.

EPSTEIN:

Can I ask you about immigration Treasurer. People are free to call and tell me which bill they reckon they’re struggling to pay on 1300 222 774. I don’t want to ask you directly about what other politicians have said because I know you’ve been queried about their statements, but there’s a distinct feeling, isn’t there, in the community that we rely too much on immigration, that the immigration number is the one that is rising the most rapidly, more rapidly than all the other economic numbers. Do we rely too much on immigration to keep the economy ticking over?

TREASURER:

Population growth is only at 1.6 per cent and the economy is growing at almost three per cent, so I don’t think that sort of bears out on the maths. But it is true that as your economy grows and as your population grows, then that population has to be serviced by increased services and infrastructure and the Budget I released last year was all about essential services that you rely on and the $75 billion infrastructure plan and that includes, importantly, city deals that we’re being able to put in place around the country which is dealing with everything from rail infrastructure to roads and other important infrastructure. The housing affordability package …

EPSTEIN:

That’s alright ….

TREASURER:

You asked the question. The housing affordability package …

EPSTEIN:

I wanted to get onto that …

TREASURER:

But that’s the point. Population growth is about infrastructure and that’s why …

EPSTEIN:

Can I just ask if immigration is a significant factor in house price rises? Do you think it is?

TREASURER:

The failure for supply to respond to that demand is the reason the houses prices have gone up …

EPSTEIN:

You’re saying there’s not enough houses, but is immigration a significant part of the rising prices?

TREASURER:

If supply doesn’t respond to demand, Raf, then that’s why prices will go up so my point is – I mean, it actually took – because of sclerotic planning and zoning practices in state governments – ten years, it was literally ten years for the housing supply to actually start moving at the same rate of growth that house prices had done and that’s why you get the gap. If you get a market signal which says build more houses and the Government stops people from building more houses then guess what happens? Prices go up. And so, that’s why we believe supply and infrastructure is the way to deal with these pressures. That’s why we have our city plans, that’s why we have a $75 billion infrastructure plan, that’s why we guarantee Medicare, that’s why we’re looking to fully fund the NDIS. These are the services people rely on and they need to be guaranteed and our Budget is doing that.

EPSTEIN:

Did your Liberal colleagues in Victoria ask you – did Victoria get its fair share of the infrastructure funding? Because they expressed that privately, they don’t feel Victoria is getting its fair share …

TREASURER:

We’re increasing our spending in Victoria but I’ll tell you what’s frustrating …

EPSTEIN:

Did they get a fair share though compared to other states?

TREASURER:

We are lifting what we’re doing in Victoria and there are more opportunities for Victoria, but let me tell you this, we have $2.6 billion – not including the $3 billion for the East West Link – $2.6 billion that we’ve already provided and allocated to the Victorian State Government to get on with things like the Monash Freeway and they’re just sitting on a big pile of money and not getting on with it.

EPSTEIN:

Okay. Treasurer, the Opposition have expressed a lot of disgruntlement about enterprise bargaining. There is one specific question I’ll put to you though: Opposition’s don’t like to release too much before we get to an election. Bill Shorten wants to rewrite one specific law. It allows employers to put workers back onto the award – which says, as you know, often pays less – when they can’t agree on a new enterprise bargaining agreement. Do you think that’s fair enough if you can’t reach an agreement, should you be able to push the worker back onto the older, lower wage?

TREASURER:

The award is what is established as the standard, that’s why you have an award and if people want to enter into agreements that better the award, well, they can do that. My problem with Bill Shorten on industrial relations is he turns up at union protests and works people up and then we have union thugs going out and threatening other workers. That’s just what happened quite recently, and he stands up there shaking his fists when it comes – and he talking to the miners – but he has policies that want to shut mines down. I can’t follow the bloke. I honestly can’t follow the bloke. The positions that he holds are so completely contradictory. I’m looking forward to him turning up to the Batman by-election border protection forum. What’s he going to say there?

EPSTEIN:

Well…

TREASURER:

I bet it’s not what he’s going to say in Western Sydney or suburban Queensland.

EPSTEIN:

Can I just say that you made that one change – he’s going to change the law so you can’t push people back on the award, you’ve got to keep them on the …

TREASURER:

What he’s going to do is pan the power straight back to militant unions.

EPSTEIN:

Might be appealing to keep people on the old agreement, rather than being pushed back onto the award. Do you agree that that might be appealing to some voters?

TREASURER:

We’re running the system, actually, that they left us.

EPSTEIN:

I know.

TREASURER:

But that’s the system they left us. They were in Government for six years and that’s the system they put in place and the awards provide that safety net. So, as we see, the economy continued to strengthening and the pressure that is there in the labour market, we are already seeing in particular areas – the health sectors a good example, the IT technology sector’s another – were those skills shortages as such? I mean, it is creating the necessary bargaining strength that we’re seeing those sectors actually have strong wage increases than in other sectors and that’s how it’s supposed to work.

EPSTEIN:

Can I just ask you one internal question, Treasurer? There is a Coalition agreement between the leaders of the National and Liberal Parties which I guess would be renegotiated with the new National leader. Is energy policy in that Coalition agreement?

TREASURER:

I’m not a signatory to that agreement.

EPSTEIN:

Have you seen it?

TREASURER:

No, I haven’t. It’s a simple agreement that guarantees …

EPSTEIN:

You’d need to be told there’s something like energy policy in there, wouldn’t you?

TREASURER:

I would, wouldn’t I?

EPSTEIN:

So is it in there?

TREASURER:

No, I haven’t been told that there is something in there that says I have to do something particular on energy policy so I think that answers your question. The Coalition agreement has been around, not just with the Liberal Party, but other non-Labor Parties for about 95 years. It is not a particularly spectacular agreement. It does one simple thing …

EPSTEIN:

If it’s not spectacular then we can see it?

TREASURER:

All it simply does is say “that we provide support to the Liberal Party so they can form a Government”. Now, there’s a revelation. I’m glad you’re sitting down. I hope you’re sitting down.

EPSTEIN:

I am. I’m shocked and grateful for your time. Thanks a lot.

TREASURER:

Thanks a lot, Raf.