5 November 2015
Transcript - #2015038, 2015

Interview with Leigh Sales, 7.30 Report, ABC

SUBJECTS: The Government’s national platform for economic growth and jobs.

LEIGH SALES:

The Treasurer Scott Morrison is with me in the Sydney studio. Thank you for coming in.

TREASURER:

My pleasure, Leigh.

SALES:

How long do you think that you and Malcolm Turnbull can keep talking in generalities like, "We need to be a high-wage, generous social welfare net country," without Australians growing bored and switching off?

TREASURER:

We're pursuing, I think, a very clear plan with the initiatives that we've already announced. We've already announced things like our response to the Financial System Inquiry. There'll be a major innovation statement before Christmas. Of course there'll be MYEFO before Christmas as well and indeed, the response to the Harper inquiry. So there is a lot on the agenda which we're unveiling and we're engaging with Australians on other major issues, particularly on issues around the tax system. But it's very important in these issues that you get it right, you don't rush into them and we don't feel under any stress or pressure from outside the Parliament or anywhere else to try and move things too quickly ahead because we're consulting, particularly with the states and territories.

SALES:

Nonetheless, can you give us any sense of a timetable on the tax reform plan because, as you say, you have been putting that front and centre?

TREASURER:

Well we're just taking it one step at a time, Leigh. I remember when I first became Immigration Minister in those first three months, which was a fairly tense time as you'll recall, and there was everyone saying, "Well this needs to happen now," and, "We want to know this, we want to know that." We just steadfastly went about the job of getting things ready, getting our policies in place so they could be done right first time and every time. Now that's my approach. I will take things one step at a time and I'll seek to take people with me and to ensure that we have our plans well and ready to go.

SALES:

You mentioned the mid-year economic forecast before. I'm wondering, is that going to be a time for policy announcements or will it just be a statement of position? I'm just wondering how significant you see that in terms of being, in terms of setting your agenda?

TREASURER:

Well it's an update on the Budget. That's basically what it is…

SALES:

And that's just how you're viewing it? You're not viewing it as an opportunity to...?

TREASURER:

No, it's an update on the Budget. The innovation statement, I think, will be a very important and significant set of policy announcements, which Christopher Pyne is leading and of course the Prime Minister is championing like I think we've seen no Prime Minister champion innovation before. So that will be a very big issue. But I've also talked about the Harper reforms and that will be a big response. And as I said before, we've already had the response to the Financial System Inquiry, all about making our financial system more resilient and a stronger banking system.

SALES:

The Prime Minister today set down the benchmark of fairness for all economic reforms his Government will undertake. Isn't the problem though that fairness is a highly subjective thing and there's always going to be somebody who thinks it's unfair because they will lose out in a reform?

TREASURER:

Well, I think that's a fair comment. It is a fair comment. And like the Prime Minister today was saying, well this is how you gauge your relationship with the Australian people on these things and they will give you the honest feedback about where they think things are. I mean, issues of compensation, for example, but I think that's why it's important to bring facts into the debate. I mean, on compensation matters, when the GST was introduced back in 2001, we had a compensation package back then and it worked. And equally, although we didn't support the carbon tax and we gave the ultimate compensation by getting rid it of it, the previous government had compensation packages for the carbon tax. So, you can put in place measures and mechanisms on whatever set of options you might look at which do protect the most vulnerable.

SALES:

But doesn't the very idea of a compensation package, I mean, you take the carbon tax example, you know, you save X amount of dollars by changing a tax and then you give out X amount of dollars by offering compensation. Doesn't there have to be a situation where the compensation does not meet the exact amount of revenue you're making from the tax?

TREASURER:

Well, if everybody was working and if everybody was paying tax and you only were making the changes in the tax system, well that would be right, but the truth is not everybody is working, Leigh, and we have people who are dependent on fixed payments out of income support, whether it's on the aged pension or whether it's on Newstart or family payments and so on. But we have the experience of doing that. If you go back 15 years ago, this was a very unknown thing that was happening. It's a much more known quantity now and the ability to tailor the adjustments, let's call them that, to ensure that you can achieve and ensure people remain in a strong position and in fact in a better position; because the only reason you'd do any of this is to make the system better and particularly for those who are out there working as hard as they can every day and we want to back them. That's what our approach is and that's what our objective is.

SALES:

You were talking today about Australia's comparatively high rates of personal income tax. Given how much government revenue comes from that though - government coffers do rely a lot on personal income tax - and given that we're facing a revenue shortfall, how is it possible to even contemplate personal income tax cuts?

TREASURER:

The question assumes that by changing the tax mix you can't grow the overall economy and grow the revenue base and so I don't share that assumption. Our tax system is actually holding our economy back and we can grow our revenue. Now our revenue is, as we discussed last time, is due and projected to grow over the next few years and will return to above the long-run average and that will be enhanced by a growing economy. But the way you grow your revenue is not by taxing people more, but by having a tax system that encourages growth and I think has the right combination of taxes. Let's not forget the almost $85 billion in taxes and charges levied at a state and territory level. What's on the table is just not the Commonwealth taxes, but all taxes and that's why this is a process we're working with in partnership with the states and territories. The only people that I'm aware of that have publicly advocated an increase in the GST are state governments and former Labor premiers.

SALES:

Well, on the GST specifically, one of your colleagues was saying before that perhaps it could be expanded to include some different food things 'cause of some inconsistencies there. If you do seek to change the GST, you're going to have a bit of a battle within your own ranks, aren't you, because people have vastly differing opinions as to what should happen?

TREASURER:

Well, I think there's an open discussion at the moment and I think that's a positive thing and I welcome it. I welcome the fact that ACOSS is part of that discussion and business groups are part of that discussion and that our own members are part of that discussion. The only ones who seem to not be part of the discussion is the opposition, but people will make their own judgments about that. We are focused very much on trying to lead that discussion and marshal it in a way with the states and territories to ensure that we have a better tax system that rewards, but particularly acknowledges and backs people who are out there working as hard as they can, they're saving for their future and they're investing in their own capabilities. Our economy is in transition and of course there's volatility globally and what we're saying is, we know Australians can be backed to see themselves through this period and Australians will not be intimidated out of their prosperity because of the volatility and the changes that are happening. We know they can make it.

SALES:

But the volatility - the volatility globally, plus the fact that our own economy is a bit fragile, if you look at the growth figures, means that...

TREASURER:

Well can I pull you up on that?

SALES:

We are below trend growth.

TREASURER:

Our growth figures are more than twice what it was for Canada…

SALES:

Below trend.

TREASURER:

But remember what the Reserve Bank Governor said today: we have had a significant fall in investment based on where we're up to with mining and what's happened with the investment that's related to that. And despite that...

SALES:

And we've not yet made a transition.

TREASURER:

And despite that, despite that, we are growing over the last year at 2.3 year average growth. Now, that is more than twice the rate of growth that they've achieved in Canada. It is higher than the OECD average growth…

SALES:

But it's below trend for Australia.

TREASURER:

But you're comparing it to years when you've had above-average growth in commodities prices and the mining boom. Now, despite the headwinds, as the Governor said over the last 24 hours being at their strongest at the moment, our economy is growing. Our rate of job growth today is 10 times what it was at the last election.

SALES:

So would you agree that you'll need to exercise caution in terms of spending cuts or do you think that there's liberty to make substantial spending cuts?

TREASURER:

We need to control the expenditure, we need to control the growth in expenditure and that's exactly what we're doing. In the area where we're remaining very focused is to ensure we're maintaining the strong pipeline of national infrastructure projects. We have got an infrastructure plan, $50 billion, which is being rolled out around the country and you need to keep the pace in those programmes. Commonwealth expenditure, gross fixed capital expenditure as a percentage of the total is higher today, what the Commonwealth is doing, than it was at the last election. We're spending more as a government on infrastructure and those sorts of investments as a percentage of the entire investment than the previous government was.

SALES:

Scott Morrison, thank you very much for joining us this evening.

TREASURER:

Thanks a lot, Leigh. Good to be with you.