9 December 2015
Transcript - #2015066, 2015

Interview with David Speers, Sky News Business

SUBJECTS: Council on Federal Financial Relations; National Platform for Economic Growth and Jobs; Harper Review; religious faith; Cronulla; Innovation Statement.

DAVID SPEERS:

Treasurer, thank you very much for you time. Now this tax debate has been running a while, what are you actually hoping to achieve in your talks tomorrow? Will you be seeking to narrow down the options for tax reform?

TREASURER:

Tomorrow we will be talking principally about state and territory taxes under that topic. I am sure other state and territory treasures may wish to raise other matters and that is fine. At our last meeting we agreed that it was important that we had a good look at the issues around Commonwealth taxes and some of that information has been presented to the leaders which has found its way out in the public space which is fine I mean that is what will be put to the leaders tomorrow. We saw all that back in October. But tomorrow we are going to be focussing on the issues and options around state and territory taxes and charges which is some $85 billion a year and that is one part of it. The other part of it I think is this, David, this has been I think a very good discussions we have had with the state and territories but I think we are really getting to the point now of being able to clarify what the objectives are and those objectives in this debate may not be reconcilable. I mean from the Commonwealth's point of view we are not really interested at all in raising taxes to support higher levels of spending. We are interested in changing the tax system to make it growth friendly and that means handing back any changes to the tax system in tax cuts whether it is in personal income tax or company tax or things of that nature. If the states agenda is simply to have a raise in taxes to pay for higher spending well we may have irreconcilable objectives there.

SPEERS:

Is it that one of the inherent problems though with the GST option - a GST would require compensation as you and the Prime Minister have acknowledged. That inevitably means higher taxes and higher spending.

TREASURER:

Well no, compensation is one issue and compensation is largely automatic because it just follows the indexation around the various payments. Then you have got personal income tax to do that. What I am referring to is if the objective of the states and territories is to ask the commonwealth to increase the GST to create a large pool of revenue for them to spend on their services and their obligation and commitments ,well it is not a magic pudding. You can't achieve all of these objectives. The Government's objective as it was back in the early 2000s was to get a tax mix switch…

SPEERS:

Sorry, but just talk me through what you are doing for pensioners. I mean if you put up the GST you are going to have to increase some form of compensating pensioners?

TREASURER:

Well, of course and the compensation is actually automatic because the indexation actually ensures that should prices rise and there would be a price impact surely but that would be immediately compensated for through the normal compensation mechanisms. That is what occurred last time and the issue of appropriate compensation was demonstrated as being effective last time this was done and so that is the lived experience. The argument that those adjustments can't be made is not borne out by experience, that is not the issue. The issue here is whether tens of billions of dollars each year should be made available through an increase in the GST to simply give to the states for them to support their recurrent expenditure. Now that is not tax reform that is just spending with higher taxes. What we are interested in in a discussion with the states is how do you make the tax system work better to grow the economy? Now, you grow the economy then the states benefit as well, the states benefit through their other revenue sources by growing the economy and growing jobs. That is the only reason for the Prime Minister and I, and the Government to be involved in this discussion. Now, it may well be, David, that tomorrow that those objectives are very different and if that is the case then it wouldn't actually enable us, I think, to get to a united position on those questions.

SPEERS:

Sure but I am interested in what you are saying here that if you went down this path, and I know this is just one of a number of options on the table, but there wouldn't be any additional payments for families or pensioners to compensate for an increased GST. It would simply be through the existing payments going up thanks to inflation going up?

TREASURER:

Well that is how compensation works and that is how it worked last time. If there is a need to provide additional adjustment payments around some of these areas then of course you would do that as well if that was the option you were pursuing. But let's go back to…

SPEERS:

But isn't that the higher spending that you're saying you are not interested in?

TREASURER:

Pardon, say that again?

SPEERS:

Isn't that the higher spending though that you're saying you are not interested in?

TREASURER:

No, that is just simply an adjustment mechanism if you went down that path. The higher spending I am talking about it when the states first came to the Commonwealth some months ago, earlier this year, they asked the Commonwealth to model and assist them in understanding how various options on the GST would deliver what sorts of revenue. Now, we responded to that, we provided them with that information in October. I presented that information along with Treasury, that is also now being provided to the leaders. Now, the states, if their position is this which says "we want the GST to go up so we can have higher levels of revenue to spend on our services" well that is a tax and spend approach and that is not tax reform - that is just spending. What we are interested in if we are to engage in these discussions is changing the tax system to support growth. That means getting the shackles off personal income tax, getting the shackles off company tax, things that are the holding our economy back. That means handing back this revenue in the form of bigger tax cuts for families and individuals and people who are working, saving and investing.

SPEERS:

Alright, let me ask you the Prime Minister did say only a month ago "when it comes to tax reform we are committed to ensuring that it is fair and that households on lower incomes are not worse off as a result. That is absolutely critical." Is that still the commitment, that those households on lower incomes will not be worse off?

TREASURER:

Well of course. Why would we be contemplating something different to that? And who is suggesting we would be? You would have to ask them on what basis would you say that. Anytime we have considered these issues, and certainly when Coalition governments have implemented them in the past that is exactly what we have done. The issue of making adjustments if you change the tax system to ensure people who are vulnerable are not adversely affected; I mean that is the lived experience. That is what is done. That doesn't, in any way, remove the opportunity to have significant changes in the tax system of cutting peoples personal income tax or indeed in cutting company tax rates if you go down this path. But those decisions haven't been taken yet, where we are at the moment with the states and territories I think is that we have some competing objectives. We want a growth friendly tax system, we don't want a spending friendly tax system and we need to ensure that we are on the same page in terms of the objective. But if we are not well that has been a useful discussion. There are plenty of other things for us to talk about with the states and territories. We are going ahead with the Harper Reforms and the productivity payment process, we are going ahead with some discussions tomorrow on how we can better ensure foreign investment decisions around strategic infrastructure assets at the state level come under FIRB review and those sorts of things are all very positive areas for discussion.

 

SPEERS:

You want to land some tax reform, we know that. I mean, how, can I ask you, how important is a unified position from the states and territories. Do you really need all of them on board for whatever you want to do?

TREASURER:

Well, at present, not all the states and territories are of that view now and that is based on a proposition from the states and territories that increasing the GST would mean just revenue going back to the states for them to spend. The Victorian Treasurer has said that he is opposed to that and he just wants to increase the Medicare Levy. I think what that demonstrates is that there are some states that simply just want to raise taxes to get more money. Now, we are not a tax and spend government. If states and territories, if that is their view well they have got taxes, they can raise their own taxes if that is what they want to do to spend more money and they can have that discussion with their own electors.

SPEERS:

What I am asking is are you prepared, as a federal government, to take on tax reform even if the states and territories aren't all behind you?

TREASURER:

Well, I am interested in a growth friendly tax system, if the states and territories want to assist us with that then great. But we will continue, I believe, to keep the options on the table from a federal point of view and the purpose of doing that David is very single minded. That is we want to give personal income tax cuts. We want to be able to reduce the burden of corporate tax if we are able to do that with such changes. Now, how far we are able to achieve that and what can be done, well that is the process of the White Paper process that we have been engaged with for some time and we are not creating, I think, any false expectations around that. We will work through that process over the summer again. If the states want to be part of that great but I think there is a bit of a diversion of the objectives here. Just because a state may want to increase the GST that doesn't mean they are interested in tax reform. That just may mean that they want more money to spend on the things they are spending it on.

SPEERS:

Peter Costello has issued a warning against the Government going down the path of increasing the GST. I know you see him as something of a mentor, have you spoken to him specifically about this?

TREASURER:

Sure. Look, I talk to Peter very regularly about these things and Peter is absolutely right - tax reform is not easy. It wasn't easy for him and John Howard but I tell you what it did; it supported growth, it supported jobs, it set up a decade of very strong government from the Howard Costello Government and, you know, tough decisions, you know what, they are tough. There's no surprise about that and I think Peter is right to point out that this is not something you embark on lightly. I think what that means is that you have got to be very clear about what your purpose is. Our purpose in engaging this debate is not to balance the Budget, the Budget will come into balance over the cycle by controlling expenditure. This is not a substitute for controlling expenditure - that is our focus when it comes to the Budget. Then we must grow the economy because that is what builds revenues and that is what creates jobs. So, we are a Government that believes we have an expenditure problem. That is the principle fiscal problem this country faces and that is what we are addressing. We also have to drive growth and you drive growth by having a growth friendly tax system and that means you address the issues that we are currently addressing in that area.

SPEERS:

Let me change tack, Scott Morrison, do you think there is a problem within Islam that requires reformation?

TREASURER:

Well, I was once advised by a former leader, we know him well, Tony, that politicians are not political theologians and I don't pretend to be one now and to offer a commentary on that. I have been around this issue for some many years and I have been quite practically engaged in the local Islamic community here in my home city of Sydney for many years and have many good friends there. There are many productive and progressive discussions happening within the Islamic community itself about these questions and that is about the indigenising of Islam. Not Muslims - I mean Muslims are people and they are Australian but how the Islamic religion plays out here in Australia and how it is organised and how that evolves over time and becomes more driven by Australian cultural practice rather than overseas cultural practice. Well, they are all positive things. I should stress that the Islamic community here in Australia and particularly here in my own city are already having those discussions and they are positive progressive discussions. In all of these things we have got to be very careful that we don't do the bidding of those who would seek to divide Australians of different faiths and to disrespect people of different faiths. I have my own faith - others have theirs, the freedom of religion is a positive thing in this country and we need to ensure that we focus on the values that unite us all regardless of our faith and that our values are the things that are prized most in that process.

SPEERS:

So, politicians should stay out of such religious debates?

TREASURER:

Well, it is for the religions to make their own decisions, whether it is mine or yours or whoever's and they will make their own judgments about these things and it is important that for any religion in this country, if it seeks to be engaging and part of the community than obviously it needs to continue to evolve and be part of the community as so many religions are. So, I am not going to get into a set of recommendations about how some other religious community conducts itself and its own practices but what I will say is this, every Australia must uphold Australian values, every Australian community organisation must be committed to Australian values and I think that is something that is shared by Muslims and non-Muslims alike.

SPEERS:

Just a final one, quickly, there are plans for a rally on Friday to mark the tenth anniversary of the Cronulla Riots. It's in your electorate, of course, Jamal Rifi I know he is seeking an injunction to stop this rally. What are your views on it?

TREASURER:

Well, I think the blow-ins should stay away. I mean in The Shire, I am down in The Shire today eagerly awaiting the arrival of the Minister for Innovation, Industry and Science, Christopher Pyne. We are very excited about the Innovation Statement that he has released this week and he is visiting The Shire this evening. In this community, we're a cohesive community, we're a hard working community and that will be a day like any other. What happened all those years ago and the revenge attacks that followed in other parts of Sydney were appalling, they were disgraceful. There are some people who live a long way from The Shire who want to come and use our community for this reason and they are frankly, they can go and do it somewhere else if they want to. We'll just have a good day down the beach and enjoy the wonderful lifestyle we enjoy down here every day and we are just getting on with life down here and celebrating the great Australian opportunities that we have in this wonderful part of Sydney.

SPEERS:

Sounds pretty good. Treasurer, Scott Morrison thank you for joining us.

TREASURER:

You are welcome to join us, David. Come and join us anytime.

SPEERS:

One day. Thank you very much for that.