5 November 2015
Transcript - #2015039, 2015

Interview with Ross Greenwood, 2GB

SUBJECTS: Address to the Economic and Social Outlook Conference; social services portfolio; Family Tax Benefits.

ROSS GREENWOOD:

Scott Morrison on the line right now, many thanks for your time Scott.

TREASURER:

G'day Ross. I may not be a rocket scientist, who is joining a little later but I am very happy to be here.

GREENWOOD:

How's that? The NASA Chief Engineer - that's not a bad get on a night when they are going to make a big announcement about Mars. Listen I just wanted - this was pretty important today, you and the Prime Minister, before we get stuck into the actual conversation just pick up this today from the Prime Minister Malcolm Turnbull that sort of sets the scene.

PRIME MINISTER:

Fairness is absolutely critical. Any package of reforms which is not and is not seen as fair will not and cannot achieve the public support without which it simply will not succeed.

GREENWOOD:

Scott Morrison, the one thing that I sense is that most Australians - most working Australians, feel like something has to change in our tax system. That something has to change to give our economy a little bit of an edge - a more modern sort of focus. Is this where you are coming from?

TREASURER:

Absolutely and we want to back the millions of Australians who are already out there; they are working hard, they are saving for their future and they are investing in their own potential and capabilities and they want a tax system that backs them. What we are engaged in at the moment is making it very clear to set out what the problems are that we think need to be fixed. Now, next year, I think I said this on your programme last time, if you are on an average wage you will be in the second highest tax bracket. Now, that is not a good outcome and I think for many Australians these days you often don't get a payslip and so you might go to the ATM and out it will come - the money - when you draw it out. Now, it won't say on there that you have just paid 37 cents in the dollar or 32.5 cents in the dollar in what you are drawing out in tax but when you go to the check-out in the shop there will be a 10 per cent bill on your GST. So, in many ways income tax can be a bit of an invisible tax, a silent tax but you are paying a lot for it and Australians are paying more and more on income tax and we think that is a real issue.

GREENWOOD:

As part of the reform of tax and, as I say, I believe the vast majority of working Australians will come along with you on this because they recognise that it really is very difficult. There is also the welfare system. Do you believe that the two need to be reformed hand in glove?

TREASURER:

Well, that is exactly what we are doing. Prior to this portfolio I was in social services and we have always sought to try and better connect the payment system, the welfare system, and the tax system. You know that the two are well synchronised when you are better off if you are of working age in this country and you are able to work that you are better off in work than you are on welfare. That is, I think, the ultimate test for any welfare system and any tax system. Right now I wouldn't say I am that confident in all circumstances and in many circumstances and we need to change that.

GREENWOOD:

I will give you one classic example. I went and had a bit of a look at the old Centrelink site today - the Department of Social Services. I actually had a look to try and work out Family Tax Benefits. Now, as you know it is almost one individual calculation for every person who is going to receive a Family Tax Benefit. So, we are talking six or seven million calculations in Australia every year for individual circumstances. Then I get there, the very first piece of information I get is saying just be very careful if you are going to get a job because it might affect your Family Tax Benefits. I thought surely it should be the other way around - go out and get a job and basically you will end up being better off than having the Family Tax Benefits. I thought this was a really, sort of, instructive way in which our mannerisms or indeed our politics or our bureaucracy had actually worked out the social welfare system versus the tax system.

TREASURER:

Well, I think you are absolutely right. There are 54 different supplement payments and 20 different payments themselves and they all sort of link together in this morass and it is a very complicated system and that is why when Patrick McClure did a report for the Government earlier in the year he set this out saying, this has to be consolidated and it has to be changed over time to simplify it and make sure that people know that as they get into work they have made a good decision. That you are always going to be better off when you are able to work to go into work. If you can get the system running like that then what you are enabling is the welfare system that is there for the most vulnerable, for those who may not be able to work or have other issues or particularly to support the aged pension when people are in retirement age that that is far more sustainable. That is why we have been quite tough on things like the Disability Support Pension which has for the first time now in a long time the number of people on the DSP is actually falling as a result of changes we've made. Because we want to make the welfare system sustainable, but very targeted on those who most need it and not a barrier to people getting into work.

GREENWOOD:

Because while we talk about the 11 and a half million odd people who are in work, they're employed according to the Australian Bureau of Statistics, the fact of the matter is it is not all of those people who are physically contributing to our economy. Because of the social welfare system and the Family Tax Benefits those people on lower incomes though they may be paying taxes are effectively collecting more from the welfare system and so they are not net contributors to the economy. So, what we have is a population of around, let's call it 24 million people give or take but we might have only eight million tax payers and that situation is getting worse by the day.

TREASURER:

Well, less than two-thirds of people actually of working age pay income tax in this country. Those on the top 25 per cent of incomes, they pay two-thirds of the income tax in this country; the bottom 25 per cent pay less than three per cent of the income tax in this country. You are right when you put the payment system in it you can be a family and you can be earning, your household, up to around $80,000 and net not pay any tax at all. The previous government changed the tax free threshold to mean that you could go up to $18,200 and you are not paying a cent of tax. They actually removed people out of the tax system. So, look, these are the issues that are out there and these are the things that we are all highlighting. This is why, you know, our tax system hasn't had a service since 2001 when Peter Costello fixed it and it needs another service. That is why we have got all of these things on the table and that is why we are encouraging Australians to examine this and say look, we can make this system better for you and to back you but we will need your support to do it.

GREENWOOD:

Is one of the real problems that every time big changes such as this comes about that some smart journalist like me or somebody else out there or ACOSS or someone finds that person who is not going to benefit from the whole system. In other words, even when we have a conversations about the GST the very next conversation is about how much compensation is going to be handed out to everybody in the community. The problem is at some point somebody has got to pay. If you are going to try and fix the Budget deficit and try and fix up the Budget debt that is sitting out there and also then go and afford the burgeoning health costs that Australians have got.

TREASURER:

Well, these things are always vulnerable to the fear campaigns that the Opposition and others will always mount. But let's remember this, we have introduced, we introduced the GST back in 2001. There was a compensation package and it worked. So, it is possible to introduce compensation packages that ensure that those most vulnerable who might be affected by this are able to be compensated through the payment system and other measures; tax cuts and so on. So, it is a complete myth to suggest that just because you make one particular change that you can't compensate for it. The Labor Party said they compensated people for the carbon tax - now we offered the ultimate compensation for that by getting rid of it and it wasn't a good tax in our view. Compensation can be designed and it can be done better today than it could 15 years ago. So, these sorts of concerns can be managed, they can be mitigated and we can get a better tax system that is fairer for everybody. But most importantly if you are out there working every day and you are having a go the tax system has to back you.

GREENWOOD:

It does have to back you. Is this about trying to dismantle the whole tax system and build it from the ground up or is it tinkering at the edges? Can you do this without actually trying to bring the whole thing down again?

TREASURER:

I don't think, I mean they are the extremes of the options that you just mentioned but there are a lot of options that are on the table. I think it will be somewhere in the middle and therefore able to get to that point. I stress ‘if we are able to get to that point' because there is a lot of work to do. A lot of the taxes that are paid, almost $85 billion a year is collected by the states and territories - now that is more than the GST that is collected each year. So, those taxes shouldn't be immune from this discussion and that is why we are sitting down, very constructively, with all the states and territories and I have got to say they have been really good - governments of both political persuasions - there are people working across the political divide. Sadly, Bill Shorten and the Opposition don't want to be part of this they just want to scare people.

GREENWOOD:

Or he is dancing around the subject as the case might be at the moment, Scott.

TREASURER:

He was dancing a bit last night but I have been known to do a bit of a dance from time to time myself.

GREENWOOD:

Just do it in private, Scott, that might be the best idea, I have to say.

TREASURER:

I reckon.

GREENWOOD:

Our Treasurer Scott Morrison on the programme and, look, this conversation is absolutely important for Australians to have. Because this whole point that three-quarters of people working to pay tax pay more than 30 cents on every dollar they earn. Fifteen years ago 75 per cent paid no more than 30 cents on the dollar.

TREASURER:

That's right.

GREENWOOD:

That came straight out of Scott Morrison's speech today and I have got to say it is absolutely vital that people go along with this to make your kids' outcomes better - their job prospects better and also for people to go and create business in the future. That is what this is all about. Scott Morrison, more speed to you. We appreciate your time on the programme.

TREASURER:

Thanks Ross, good to be with you.