5 November 2015
Transcript - #2015036, 2015

Q&A session, Economic and Social Outlook Conference

SUBJECTS: Tax White Paper process; Financial System Inquiry; Social Services portfolio.

QUESTION:

Sid Maher from The Australian, Mr Morrison.

TREASURER:

All your speculation is innocent, Sid.

QUESTION:

I can assure you I know how much tax I paid down to two decimal points.

TREASURER:

Good man.

QUESTION:

There's a couple of things, Peter Harris made a very good speech earlier today and he's advising the Government to couple tax reform with competition and regulation reform and have a once in a generation hit at all the inefficiencies in the states. Are you tempted to do that?

TREASURER:

He is right.

QUESTION:

And secondly I would like to ask, given what you have said about bracket creep and the level of personal income taxes, is it tenable for your Government to go to the next election with the same tax rates given what you have just said?

TREASURER:

In answer to the second question, I think the speech I have just given you outlines our thinking on those issues and I have got nothing further to add than what I have said. But on the first question I agree absolutely with, Peter. I think that is absolutely right. Having a conversation about tax, having a conversation about competition policy, having a conversation about how we fund infrastructure, how we have a more resilient banking system, this is all about the one thing - it's about growth and jobs in the economy and of course they're connected. They should not be seen as separate strands. This is the plan. I think the more we connect all of these issues, not just in policy, but also our collaboration on policy, whether it's with the states and territories or others, then I think the Australian people and businesses can see that and go, you know, they've got their plan together, I need to now work on my plan. That is what I think the job of Government is with good policy. It is to give Australians the confidence that there is a strong plan being implemented and getting results and so that frees up Australians to stop worrying about the government perhaps and be able to apply all of their energies and efforts to their concerns because they are the best architects and the best designers of what is best for them.

QUESTION:

I will ask you another question on competition policy. One of the key principles…

TREASURER:

Do I get to phone a friend with Professor Harper down here?

QUESTION:

One of the key principles of Hilmer and Harper has been that without exception anything that harms competition, which is bad for the consumer, bad for the whole economy shouldn't be tolerated - no exceptions. How do you feel about the big business lobby which wants a special exemption for itself so that, if it engages in behaviour that lessens competition, it's exempt, unless it can be proved in a court of law that that was the purpose of the behaviour and that it took advantage of the market power and a whole lot of other provisions that no other countries, except New Zealand, have? And if they get that exemption do you think that other people who are going to be subject to the competition policy are going to accept it willingly when big business gets off?

TREASURER:

Sure. Well thank you, Allan. One of the, I think, unfortunate things over the last six or nine months is, I think, the broader competition policy agenda which is set out in Ian's report with the panel, was able to be, I think, overwhelmed and usurped by one recommendation on Section 46. Now, it is an important recommendation, they're important issues, and they need to be worked through and we need to arrive at an outcome. But what I won't allow to happen is for that debate to undermine and prevent the more important issues around competition policy reform, and to be able to repeat in fact better the competition reform outcomes that were achieved in the post Hilmer process. I am quite a fan of what was able to be achieved back then and I am genuinely excited about what is possible. If we think back to that time, when the sort of services that back then was being suggested be done differently would cause some to shrink back in horror, they are all now part of the normal course of Australian life, whether it was on energy or things like that, they are all normal. Similarly today when which think of some of the issues that Ian has raised in his report, you get a similar reaction but the opportunity and the economic advantage that can be secured from pressing ahead with them is just as great and I'd argue bigger, particularly in the area of human services. But to come back into the area of Section 46, I said before that the test of competition is about how many choices the consumer has, not how many competitors there are. I still think we have some distance to travel in landing on this issue. I don't really want to pursue this debate in a fairly binary way - it is either this option or nothing. I've never really dealt with issues of policy in those sorts of binary terms so I am going to continue to engage with the various stakeholders in this as is Kelly O'Dwyer, who has particular responsibility for engaging with small business. We won't be rushed on it, I don't think it's an issue that needs to be decided by tomorrow afternoon but it is an important issue that has to be resolved and you will see us I think start to see those two issues go down two tracks.

QUESTION:

Meredith Doig, President of the Rationalists Society of Australia. Treasurer, I want to draw your attention to the title of this conference is ‘The Economic and Social Outlook.' The Prime Minister this morning talked a lot about innovation but mostly that was about economic or technological innovation. I wanted to ask you about social innovation. It might be a little bit off your current portfolio but you have had experience in the social portfolio, so perhaps you may be able to think about something like this. So, my question is really what are your list of priorities on social innovation for Australia? I will give you an example, and that is in drug reform - illicit drug reform. We know that the war on drugs has failed incontrovertibly. We spend - everybody spends a lot of money on it - it doesn't work. In Portugal, it has worked, at least it has reduced by 50 per cent the number of people who are dying from ingestion or use of illicit drugs. It's an example of social policy or social innovation that might change. I am not necessarily asking you to comment on that one but I wondered whether you might have favourite ideas for social innovation that suit Australia?

TREASURER:

Sure. For those who may have seen some of the work I was doing when I was in the social services portfolio, I would speak regularly and passionately about social impact investment and social impact bonds. The reason I was excited and remain very excited about those issues is because we need, and Lynne is here I notice today, we need to be able to, I think, bring more minds, more focus, more innovation when it comes to solving challenging social problems. It's one of the issues that we've sort of canvassed openly with states and territories. I mean, for example, a social impact bond works on the principles, which I'm sure you all know, which says if we have a particular intervention, that will have a particular result, which means that recidivism rates or health costs or it might be income support costs will be different to what they might otherwise be. So you share in the benefit of that with the investor. Now, why it works often better in some other jurisdictions than just have one level of Government is you can capture all of those benefits and wrap them up into the bond. Now that hasn't stopped the New South Wales state government or the South Australian government doing some really innovative things in this space but it does limit when the Commonwealth and the states and territories aren't working together on these types of interventions and I think there's scope to deal with that. The other reason I really like social impact bonds and social impact investment is it brings another discipline to the delivery of services in that sector. Now, what I found working in the social services area, is you will not find finer, more dedicated, more passionate people, dedicated to getting one simple outcome and that is to help the person who is in front of them on that day - you won't find anyone more committed to that. But the mechanisms and the disciplines and the efficiencies and the thinking and innovation that comes with having your own money on the line which needs to get an outcome can bring great assistance. It's not a replacement for public investment in these things or funding. But I think it is a real innovation that we're at only the start of and so I remain very enthusiastic about those things. I said in my remarks, a strong economy is what you need to sustain a targeted, well thought through and effective social safety net. Our social safety net is one of the most important assets that we have as a country because it provides stability to our society. Without that, and it's pretty hard to grow your economy.

QUESTION:

Paul Kelly from The Australian, Treasurer. For some time now the state Premiers - Liberal and Labor - have made it clear that they see what are the principle outcomes of taxation reform being to assist them finance their main services; health and education - particularly health. As you approach the negotiations and consultations over tax reform and obviously attempting to reach as much concord as you can with the Premiers, what sort of priority do you give to Commonwealth tax reform being directed towards that purpose?

TREASURER:

I said that the states and territories are beneficiaries, so therefore they need to be active participants as well. It just doesn't work that we would have a tax reform programme which just delivers them a bucket of money. That is not how it works and that is not what we are interested in doing. We are also interested and this is why the competition policy issues and the discussions we are having around the tax system are linked. I don't think the Australian people would take kindly to having to have changes to the tax system that doesn't result in those who are spending money not spending it better and more effectively and getting better services and getting more choices and getting better outcomes. So, everyone, I think, has to come to the table to make things work better as part of this process. That is why it is important right now, to take the time to work through what, on occasion, can be a misalignment of objectives between the various players and to seek to resolve those. That is the process we are writing right now. So, jumping off into interesting future debates which I have called an accountant's picnic on occasions is not where we need to be right now. Where we need to be right now is what are we collectively trying to achieve through these various strands of important policy - not just tax policy but competition policy and other things as well? So, yes there is a view, obviously, that some states may just want a big bucket of money and for the Commonwealth to go and find it for them. That is not our plan, that is not [inaudible], that is not what we are interested in. What we are interested in is helping grow their economies, grow our economies with all of these changes and I have got to say I find the Treasurers very engaging on the topic. We will be an adult and robust federation because we have all got so much to gain. Obviously, as Liberals our principle is that we would only be doing this not to increase the tax burden on Australians - that is not our intention. I said before the way to balance the Budget is to ensure expenditure is less than revenue - not to ensure that revenue is higher than expenditure and just spend all day long. That is not our approach - that is not how we intend to get the Budget back into a position of surplus. So, that is where we come at it but it is very important I think you would have picked this up from the Prime Minister we are a very pragmatic Government, a pragmatic Government that just wants to get the results and get the job done and I think that is what the Australian people really want. They have had enough of all the fighting, they have had enough of all the partisanship - they just want the Government to get on with it and hopefully what you have heard from Malcolm and I today and my colleagues over the course of this conference will send you that exact message because that is the job.