8 April 2016
Transcript - #2016044, 2016

Interview with Fran Kelly, ABC RN Breakfast

SUBJECTS: Budget 2016; ensuring government lives within its means; Labor’s unfunded promises on health; Arrium Steel; ABCC; Mossack Fonseca; Turnbull Government’s action on Multinational Tax Avoidance; Labor’s decision to vote against the Turnbull Government’s Combating Multinational Tax Avoidance legislation

FRAN KELLY:

Scott Morrison. Thank you very much for joining us.

TREASURER:

G’day Fran, good to be here with you.

KELLY:

I thought I saw your face pale when I reminded you it was less than a month to the Budget.

TREASURER:

Not at all.

KELLY:

You are in the thick of it though – Budget preparations. This analysis that The Australian has published today from Treasury, the PBO, Government departments, shows big spending programs will wipe more than $400 billion from the Budget over a decade. NDIS, defence, changes to higher education and so on. Have we blown any chance of ever living within our means?

TREASURER:

No, I don't believe we have. It's important that we stay on the track that we, as a government, have put Australia on and that is to reduce our expenditure as a share of the economy, and this is the key challenge going forward. I think the article today is a timely reminder of the significant pressures that are on the Budget. Projects like the NDIS, projects [inaudible] ensuring our Defence Forces get the support they need. Things like this.

KELLY:

Good spending?

TREASURER:

It puts a lot of pressure on the Budget and that means that you have got to have the discipline to ensure that you keep your expenditure under control going forward. And the statement I released late last year on the update has us on a downward trajectory of spending as a share of the economy. Now that is critical. You have to get your spending as a share of the economy down. The way you deal with this Budget challenge is not to tax more and spend more. The way you deal with it is you get your expenditure under control, and you create the room in the economy for private businesses to grow and employ people. That's the path to jobs and growth. That's the way you transition in this new economy. You don't go back to that old economy way of tax and spend.

KELLY:

It would seem, though, that this Budget, the one we're going to have in less than a month, won't start the heavy lifting needed to really deal with the revenue problem or the balance problem. Does the Budget have any hope at all of being back in balance by 2021? I mean that path you are talking about seems like a slow one.

TREASURER:

The path I am talking about and I think you have got to be patient about this, you have got to be determined about it. Our path sees expenditure as a share of the economy falling over the Budget and the forward estimates and that will be the trajectory we will seek to continue in this Budget going forward. We've done the work. Over the last couple of years we have had significant measures to reduce government expenditure, to better target government expenditure, to refocus government expenditure on the things that will get better outcomes for Australia. We haven't engaged in the fantasy funding of the previous government, making promises with that money that was not there and that they couldn't afford and there has been a reality check on that...

KELLY:

Just on the fantasy funding, if the promised health funding is fantasy money, as the Prime Minister describes it, do you say the same about the $111 billion promised for the NDIS?

TREASURER:

Well, that was not funded.

KELLY:

So, that's fantasy money too?

TREASURER:

Well, it has to be funded. What we are saying is we’re committed to the NDIS but we are not going to engage in this fairy-tale that the previous government was and Labor continues to indulge that it's fully funded. I mean $5, $6 billion a year extra has to be found to support the NDIS going forward. Now, we will find it and we will support it but we're the government that actually has to deliver it – not just promise it. Labor is great at promising other people’s money or money that is not there to do things. Coalition governments get it done.

KELLY:

Ok, let me come to that because you insist there is a spending problem – there is a spending problem.

TREASURER:

I know there is, Fran.

KELLY:

There is a revenue problem as well.

TREASURER:

I don't share that view.

KELLY:

The Financial Review reports today you have given up plans to wind back work related tax deductions, which could have been worse about $5 billion in the Budget. Also that any company tax cut that you're going to announce will be perhaps announced but delayed. What is the Government left with when it comes to tax; changes to superannuation, nothing else – is that it?

TREASURER:

I don't accept the view about the revenue problem. Revenue as a share of the economy will be higher than the long-run average next financial year. Any time you hear anyone say we have a revenue problem, which is what Bill Shorten says and which is what Chris Bowen says, what it means is they don't think Australians are being taxed high enough. That's why they're going to tax them more. Bill Shorten has announced over $100 billion in higher tax burdens for Australians over the next 10 years. He's going to this election promising more than $100 billion in and an additional tax burden for our economy. Now if he thinks taxing the economy with $100 billion of higher taxes over the next 10 years is a way to grow the economy and to grow jobs in this transition, in this tough global environment, then he's got rocks in his head.

KELLY:

But if you're not making any changes does that mean you believe our tax mix and the level of tax concessions in the economy at the moment are correct? It was only a month or two ago when you were talking about excesses in the negative gearing system but you're not going to tackle it. If there are excesses shouldn’t you be dealing with them?

TREASURER:

The tax mix is one issue and the tax mix is one where you can deal with that and not raise the tax burden on Australians. So the tax mix I think is a very valid issue and the Government continues to pursue those issues.

KELLY:

Are you doing anything on this in the Budget?

TREASURER:

Well, the Budget is on May 3, Fran, and I invite you to come and view the Budget.

KELLY:

I will there, Treasurer.

TREASURER:

I’m sure you will be and that is where we will be answering those questions in specific detail. We need to be clear, if you want to stop people doing something, you tax it more.

KELLY:

What if you want to stop the excesses though?

TREASURER:

Well, if you want to stop people investing you tax it more and the Labor Party is putting up a tax on investment by 50 per cent on mum and dad investors who are investing not just in existing residential properties, but in shops, in factories, in all of this, they say a 50 per cent increase on your tax burden to go and invest in our economy. And honestly, I don't understand the logic of the Labor Party. It is just old-economy politics. It's old-economy Labor saying: we want to tax you more because we can't control our spending.

KELLY:

So, superannuation is the only area left in the Budget that there will be changes?

TREASURER:

The Budget is on May 3, Fran.

KELLY:

It looks like it will be a July 2 double dissolution, at the moment, that's where the politics seems to be heading. That makes the May 3 Budget a springboard for the election campaign. Can you win with a thread bare Budget stamped "living within our means" with none of the traditional pre-election sweeteners?

TREASURER:

The Government does needs to live within its means because the Australian people are living within their means and Australian businesses are living within their means…

KELLY:

So, how are you going to pitch…

TREASURER:

…So, this isn’t some pronouncement to the Australian people. The Australian people already know it and are doing it. That's why in our economy, which grew at 3 per cent last year, 300,000 people were getting into jobs last year, youth unemployment falling to below where it was at the last election, young people actually getting out there and applying for jobs and getting jobs, this is happening because of the strength and resilience and determination of the Australian people who are living within their means. They expect the government to do the same. They don't expect politicians to tax them more, to spend more, because that's not a job path to growth and jobs.

KELLY:

Let's talk steel, Treasurer.

TREASURER:

Sure.

KELLY:

Arrium has been placed in voluntary administration. Whyalla is frightened and in shock. Bill Shorten says any opportunity for co-investment for a period of time is something the Federal Government should be considering. Will you consider that?

TREASURER:

Bill Shorten will play politics with every single issue at the moment it would seem.

KELLY:

Well, is it a good idea?

TREASURER:

The state government is engaged principally in that discussion. We have been working with the state government. I have got to pay credit to Christopher Pyne and Tom Koutsantonis, who've worked across the aisle on this, federal and state, to address the very real issues that are going on in Whyalla. We've brought forward some $80 million or thereabouts in expenditure with rail track to fast track that program in South Australia which will see that sort of investment, those sort of client contracts be put in place to support that business going forward. We've engaged in the anti-dumping changes. There's further work going on, on the aluminium and the steel industry now. But what you don't do, Fran, is you don’t get involved in a knee-jerk reaction the sort of thing that says: let's tear up our trade agreement, let's tear up the jobs in the new economy to go and play politics with an issue in South Australia. What I'm seeing is Labor and Liberal in Tom Koutsantonis in South Australia, the Labor Treasurer, in Christopher Pyne as the Liberal Innovation and Industry Minister, working together to focus on the problems in Whyalla.

KELLY:

Well, that's what I'm trying to find out is what more...

TREASURER:

What I’m seeing Bill Shorten do, is engage in negative knee jerk reactions which don’t engage in the issues.

KELLY:

What more can the Government do without tearing up our trade agreements, as you say, the Government appears to have ruled out mandatory procurement of Australian steel but can’t it be done within our trade laws, isn’t that a question of degree. The company says $100 to $120 million in initial orders over the next two years will do it.

TREASURER:

Well, we’ve already acted on bringing forward that expenditure in relation to the rail.

KELLY:

So is there any more we can do?

TREASURER:

Well that is a very significant commitment, Fran, that is a huge commitment, and we moved very swiftly on it, because we knew it was important. 

KELLY:

So, you can’t mandate the percentage use of Australian steel…

TREASURER:

Well they’re trade agreements Fran, and those trade agreements are providing jobs in the new economy and the services economy and these are important considerations that you have to take into account. And these things are creating jobs in the new economy we need to support jobs more broadly across the economy but you don’t do it by engaging in that old economy Labor politics.

KELLY:

Is that what procurement is, mandatory procurement?

TREASURER:

Well, mandatory procurement, when put in the way that the Opposition Leader has put it forward, would run at odds with the trade agreements which are actually growing jobs in our economy. And so what we’re doing, is we’ve brought forward expenditure for that major rail project in South Australia which will be an important injection through normal business. Now, I’ve spoken to the banks, the Prime Minister has spoken to the banks, The Prime Minister and Cabinet’s department has spoken to the banks, and engaging with them as Tom has, and has Christopher has, there is a pathway here which is all designed to keep this business in business. That is the plan, I think people have been very patient and methodical about this. I mean the business plan that was in place before under the management, clearly there was not a confidence that that was actually going to secure the long term future of the business. The banks are interested in having a long term future for that business, to ensure that their position is obviously improves as well. And that’s what everyone is working to collectively and cooperatively, except for it would seem, Bill Shorten,  who just wants to play politics with another very serious issue in the lead up to an election.

KELLY:

There are so many issues on the Treasurer’s plate at the moment. Scott Morrison joins us, on the banks, there are calls for a Royal Commission. Not just from Labor but also from two Coalition MPs so far, John Williams and Warren Entsch. You had a royal commission into trade unions, considering the recent spate of scandals, considering what Warren Entsch described as the immoral conduct of the big banks why not have a Royal Commission into the banks?

TREASURER:

I’m not saying for a second there aren’t issues to be addressed. And they are being addressed and when we have a tough cop on the beat in this area…

KELLY:

Well, it’s clearly not working

TREASURER:

Well, no I wouldn’t say that, I mean there are prosecutions pending. There are charges and there are investigations and ASIC is doing its job. We have a very well-regulated banking and financial system. In fact, Fran, you’ll know that it was the strength of our banking and financial system that was critical to the way the Australian economy performed during the global financial crisis. Now, what I find concerning about this is we recognise the issues here and ASIC and APRA and all of these organisations will do their job. What I’m seeing from Bill Shorten is a distraction from the issue around the ABCC, but a reckless distraction, because what he is suggesting is widespread corruption in the banking industry. Now, if you want to…

KELLY:

What he’s suggesting is, I think, is, I think, was everyone’s been looking at over the last couple of years, which is issues that keep arising from the banking section, that are ripping off ordinary people… financial advice … insurance…

TREASURER:

And that’s what ASIC is for, and that is what the law is for, and the law is being applied and there is a tough cop on the beat to do just that.

KELLY:

But the same could be argued, couldn’t it Treasurer, for the ABCC because…

TREASURER:

  No, it can’t Fran, that’s the point…

KELLY:

Why not? The ABCC has the fair work commission looking at it…

TREASURER:

There is not an ASIC that has that power in the building and construction...

KELLY:

There’s the fair work commission…

TREASURER:

It doesn’t do the job that the building and construction commission can do…

KELLY:

I think a lot of people would say that ASIC isn’t doing the job because look what’s happening in the banks…

TREASURER:

Well, I would say ASIC is doing a lot better than a non-existent Australian Building and Construction Commission is doing in the construction industry that employs a million people, and this is an industry where Bill Shorten is prepared to defend the corrupt practises of unions in the building and construction industry. Now, I make that point Fran, as Treasurer, for one simple reason, it is harming productivity and jobs in the construction industry. There needs to be a tough cop on the beat in the construction sector. Bill Shorten has gone out there and he is trying to engage in a massive distraction for political purposes to distract attention from his defence of corrupt practices in the building and construction industry. Now, he needs to face up to that, we have a cop on the beat when it comes to banks, and we need to address that. No one in the Government is suggesting we shouldn’t, but that does not excuse Bill Shorten from his reckless distraction in what can, if he pursues this… I mean you think about people offshore, what sort of message do you think Bill Shorten saying there needs to be a Royal Commission into the banks sends to the international community about confidence in the Australian banking system…

KELLY:

That Australia is cleaning up its system…

TREASURER:

And what do you think that is going to say to investors looking to Australia. Now you need to have a proportional response, Fran, that deals with the problem. Now, the problems are identified, they’ve been identified by other actions in the courts, and actions taken by ASIC. The problems are being dealt with, and for Bill Shorten to go down this path, I think, it is a reckless distraction that puts at risk confidence in the banking system, and I’m wondering why I haven’t heard too much from Chris Bowen on this, I mean I don’t know if he agrees with Bill Shorten on this. But it was only a year ago, Fran, that Labor voted against a royal commission into the financial sector – it was only a year ago. He voted against it a year ago, Fran. But apparently in the eve of an election when there are a few reports about banks, Bill Shorten is up there in hill ill-fitting suit, puffing his chest up and saying we need to thump the table. This is classical political distraction.

KELLY:

Well, talking about Bill Shorten and Chris Bowen, what about you and Malcolm Turnbull? Because just two days ago Malcolm Turnbull was rebuking the banks for putting profits ahead of their social contract, their social licence with customers.

TREASURER:

And I agree with him.

KELLY:

There is a perception at least that once again you are at odds with the PM.

TREASURER:

No, I agree with what Malcolm Turnbull said.

KELLY:

But we don’t need to do any more?

TREASURER:

Malcolm Turnbull did not call for a Royal Commission.

KELLY:

No, he did not.

TREASURER:

And the Government is not calling for a Royal Commission. The Government, the Prime Minister and myself, as Treasurer, is saying these issues have to be addressed. We have been working on these issues, whether it is with the RBA, the Council of Financial Regulators, APRA, ASIC and they’re all doing their job. If we had that operating in the building and construction industry Fran, which is what the 18th of April is all about this is why Bill Shorten is saying this today because he knows on the 18th of April he has to walk into that parliament and defend corrupt practices, lawlessness in the building and construction industry and he can’t make that argument.

KELLY:

Treasurer, we are almost out of time but I must ask you one question about the Panama papers this week shinning spotlight on how the rich and powerful are using offshore accounts to shield their wealth from taxes and obviously there are some other illegal financial dealings going on too. Are you confident Australia’s banking sector is doing enough to stop the flow of funds out of Australia for nefarious uses? Aren’t our banks supposed to report suspicious activities or are you also comfortable with the role that banks are taking and some of our accounting firms? They are helping people with this advice.

TREASURER:

Well, again, the systems whether it is Austrac or the various other mechanisms we have to deal with these issues and the reporting. The ATO is doing a brilliant job in this area, Chris Jordan whether it is on…we had Project Wickenby over a period of time, we now have new investigations that are running forward. Last year we passed legislation to crack down on multinational anti avoidance practices and Labor voted against our multinational tax laws at the end of last year. That will yield a significant revenue dividend for the tax payers of this country and it will ensure that multinationals will pay their fair share of tax on what they are earning in Australia for the life of me I don’t understand why Labor, when push comes to shove, would vote against legislation that would crack down on multinationals paying their own tax. They voted against it, Fran. Their actions don’t match their blown-up political rhetoric before an election.

KELLY:

Alright Treasurer, thank you very much for joining us on Breakfast.

TREASURER:

Thanks Fran.