10 December 2015
Transcript - #2015067, 2015

Press conference, Sydney

SUBJECTS: Fall in unemployment; creation of 71,400 jobs for Australians in November; strongest pace of annual jobs growth since 2008; Council on Federal Financial Relations; Harper Review; Foreign Investment Review Board; backing Australians who are working, saving and investing; National Platform for Economic Growth and Jobs

TREASURER:

Before I come to the issue of the meeting of state and territory Treasurers today I just wanted to note the release of today's employment numbers which the Government, of course, welcomes, but the real congratulations goes to the 71,400 Australians who've been able to put themselves into employment and I particularly commend all of those businesses that have been out there creating those jobs. They are the heroes of the economy in creating jobs and the best thing any government can do, the best thing any business can do, is to ensure that we're creating an environment where we have jobs growth and in the course of the last year, some 344,200 jobs have been created. That's the strongest pace of annual jobs growth since 2008.

With unemployment now decreasing again for the second month to 5.8 per cent in November, we welcome the movement in these figures, and we particularly welcome them from the point of view of those Australians who found themselves in employment and again those businesses who are out there backing themselves, doing the things that they need to do to grow their businesses and taking people on board. I think this is a very encouraging sign prior to Christmas and we've seen that coming through in some of the leading indicators now for some time, and it's great to see that translating into people being in jobs.

This Government is about jobs and growth. That's what it's about. And we're very pleased to see those numbers where they are today, and they attribute to an economy and the participants in an economy that are backing themselves and that's why the Australian Government wants to back Australians who are out there working hard, saving and investing, whether they're doing that as businesses or whether they're doing that as individuals. So, we very much welcome those figures today - some 425,800 jobs now created since this Government came to power after the last election. And it will continue to be our strong focus, to drive jobs growth, with every lever we have available to us in the future.

Now, today, the state and territory Treasurers met here in Sydney for our final meeting of the year. I want to thank all the state and territory Treasurers for their participation. These meetings, I think, demonstrate once again that when you get people around a table who are committed to growing our economy, then you can work through many issues and today we were able to do that again. Particularly in three areas; and the first of those, the Harper response, which I announced a few weeks ago, we are now taking the next step on that process with the state and territory Treasurers and we will be working up an institutional mechanism and series of processes that can put in place that productivity payment and a competition reform programme at a state and territory and federal level. It's one of the key recommendations from the Harper Report and I'm very appreciative of the enthusiasm that exists amongst the states and territories to combine together with the Commonwealth to ensure that we are driving the sort of economic changes at a state and territory level, at a micro-level, that can continue to see pick-up in growth and performance at that level. So that is an important outcome of today and that work will go forward into next year. It is painstaking work. You have to get these things right. Last time round, when the Hilmer process was in place it led to an increase in economic growth of some 2.5 per cent. Some $8.5 billion was invested in today's dollars over about a 10-year period to drive productivity reforms at a state and territory and federal level and it got the results. So, I'm pleased to get the support from the states and territories in going forward with that agenda.

Also, on the issue of foreign investment – the Government will be proceeding with our regulatory change to ensure that strategic critical infrastructure assets at a state and territory level will be subject to FIRB processes regardless of whether it's a state owned enterprise, foreign investor or otherwise. This is a process we put in place some months ago and have been consulting with the states and territories. I note that in the public domain there've been other issues that have come up in the meantime this process was well advanced already at that time and I thank the states and territories for their consultation on that process. This will mean, of course, that we will seek to work very promptly with the states and territories where there are acquisitions that relate to those types of assets and there needs to be, I think, a very professional and efficient and high-priority response from FIRB to those requests and some preparatory work done with states and territories also to ensure that the process moves as smoothly as possible. We welcome foreign investment in this country, but it must be consistent with the national interest and state and territory Treasurers certainly support those principles and I think there was very good consensus on having a very workable system. You will probably note that last week I announced appointments to the FIRB board, in particular, David Irvine and David Peever. Both of these gentlemen bring great experience in the area of national interest, particularly strategic national interest and issues around security and so on and that will ensure that many of the often very difficult considerations that have to be made by FIRB will have that expertise, adding to the existing very strong commercial expertise which sits on the board. When you have a strong FIRB doing its job, applying the rules, protecting the national interest, that can only build confidence in foreign investment in this country and that's what the Government is doing.

Now, on the issue of tax, we had a very good discussion today. State and territory Treasurers and the Commonwealth, we all agree that we need growth and we need a growth-friendly tax system. And today, we decided to take further the discussion on these issues. Those discussions focused on having a set of models done which will look at the tax base, as well as the tax mix. But from the Commonwealth perspective, the only models that we will be looking at will be ones that don't lead to an increase in the tax burden in this country, on tax payers; that net of compensation, don't lead to an increase in the immediate revenue that may flow to states and territories from any changes in that area. These are still issues that we are working with the states and territories and there are no decisions, there are no preferred options, there are no preferred models that are specifically being put forward.

The issue here is ensuring that states and territories have a sustainable revenue base, but the Commonwealth – and we made this very clear today – won't be in a position where we're contemplating tax changes that would see an increase in taxes used to fund additional expenditure. The only additional expenditure that would be incurred would be as a result of any transitory compensation that would result from any tax changes that were made. And so net of those compensations, all revenue that may be derived from any changes in the tax mix would go towards tax cuts. That's what we believe tax reform is about: changing the tax system is about having a growth-friendly tax system that removes the shackles from Australians, from Australian businesses, so they can go out there and do what the employment figures showed is already happening in the economy and that is to support growth and to support jobs.

So I want to thank the states and territories for their engagement on that. The key change here is looking at the composition of the potential base. Now, the Commonwealth has gone into this without any prejudice on the position of what that might be, but Jay Weatherill, you will remember, the South Australian Premier, put forward some proposals that looked at a different sharing arrangement out of consumption taxes and income taxes, and if the states wish to look at models which diversify the tax base between those two streams, then the Commonwealth has undertaken to look at that without prejudice, but where I think we've got to positively today is clarification on this objective - the objective of any changes to the tax system is to ensure that there's a reduction, if you like, in the overall tax burden on taxpayers, and certainly, not an increase on the tax burden on taxpayers. That means that any changes in the tax system would ensure that any revenue that flowed from that would go back to taxpayers in tax cuts. So, with those comments, I thank the state and territory Treasurers for the very constructive way we engaged today. There's certainly a different set of views around the room, and they have a set of challenges that they refer to. The Commonwealth has its set of challenges, but the one thing we're all focused on is growth. We know that that's the thing that we must address first, if you can address economic growth, whether it's through the innovation statement or the changes to the tax system or our $50 billion national infrastructure plan, or the many other changes that are under way, it's growth that counts, because that's what delivers jobs and that's what grows revenue – not jacking up taxes.

QUESTION:

Treasurer, do you see any merit in the idea that is part of the South Australian model where the states get a share of income tax, 17.5 per cent, I believe, they could spend it as they see fit with less interference from Canberra on how they spend that money. Is there any merit to that?

TREASURER:

What you're referring to is, let's say, let's assume the tax base for South Australians or any of the states as they get the GST revenue currently. Every cent of the GST revenue currently goes to the states and the territories. What is at the heart of the South Australian proposal is that you might have their tax base made up of, for argument's sake – and these are arbitrary figures, they're not a proposal in any way, shape or form – is that 80 per cent of their tax base may be GST and 20 per cent might be drawn from a share of income tax. Now, that's not something that we're proposing but it is something that has been suggested and that is something that you can model. Not those precise numbers but looking at a change in the tax base mix, as well as a tax mix switch. There's a lot of phrases in all of that but largely it's looking at both issues. The states are interested in what their revenue base is going forward over time. They're making those points reasonably and we're pleased to work with them in trying to address that but you don't fix those issues by jacking up a tax and taking the revenue that flows from it. That's something that would only retard our economy, slow our economic growth and that's not going to improve their revenues either. So, what we need to do is focus on growth.

QUESTION:

Could the model mean Canberra would have less of a say, there are so many tied payments to the states, Canberra spends so much of its time and energy trying to monitor what the states are doing, telling them how to spend their money – would it be cleaner, better, more efficient if the states were given a bloc of money and they spent it as they...

TREASURER:

There is certainly the opportunity for that. I think that really then goes to the COAG-level discussion about those types of arrangements and leaders will have the opportunity to discuss those things. But states are sovereign. They're not branch offices of the Federal Government. They are their own sovereign governments. They have their own responsibilities. They have their own taxes. They have their own expenditures. And they have the opportunity to address all of those issues to meet their objectives. The Commonwealth similarly. Now, what we're looking at is how do we help each other more to achieve our respective purposes. A better tax system, a more efficient tax system, a growth-friendly tax system, where you can deliver income tax cuts and hopefully potentially company tax cuts, then that will help grow the economy but to achieve that, then you need to go down a path where you're looking at the overall tax mix.

QUESTION:

Treasurer, how long do you think the consultations will last and when can we expect some decisions?

TREASURER:

The Government would certainly be taking any changes in this area to the Australian people, to an election. That's been our commitment all along. So, the election is scheduled for the second half of next year, and that gives you, I think, a time frame by which these issues would need to be resolved one way or the other in terms of what may be put to the Australian people.

QUESTION:

Treasurer, you said there were different views and specifically on the GST there were obviously different reasons for hiking up the GST for the Commonwealth and for the states. That is very plain to see. Does that mean now that any GST hike is off the table?

TREASURER:

All options remain on the table for the purpose of growing the economy. But that is the point. I think where there has been differences among some states, and the Commonwealth, is that some states, not all – I mean in particular the Western Australian Government they've always been in support of a situation where you achieve a change in the tax mix which isn't done to simply see a flow of revenue go to the states to support increases in recurrent expenditure. They've always been in the position of looking at tax reform to help grow the economy without seeing it as a revenue-raising exercise for state expenditure. The Northern Territory has also been quite sympathetic to that more growth-orientated discussion. Other States had put forward the idea initially when it came to us about increasing the GST to support growing expenditure in other areas and obviously New South Wales has made that point. You've got Victoria and Queensland, which didn't suggest an increase in the GST, but suggested an increase effectively in income tax to pay for commitments in health and other areas in their states. So, you have some states that have said 'we need to increase taxes to support higher expenditure'. You've had other states who, like the Commonwealth, have said 'no, we need to change the tax system to grow the economy and from that, there will be revenue growth' as a result basically floating everybody's boat, the rising tide argument. So today, I think we were able to clarify more specifically this discussion we're having about tax is about how we grow the economy. Not how you create an immediate additional pool of revenue for recurrent expenditure.

QUESTION:

Treasurer, why shouldn't – if the states face a growing shortfall in the funding they need for health and education. Why shouldn't national reform look at that, isn't that part of the problem of federalism?

TREASURER:

Increasing the tax burden doesn't support growing the economy. That's our fundamental view. It's our view that if you're going to engage in changes in the tax system, you don't do it to increase the tax burden; you do it certainly to change the mix and wherever possible to reduce it. And particularly in the areas of personal income tax, where you've got the average wage earner going onto the second highest tax bracket next year, these are very serious problems in the tax system. They're the things you need to address, we believe, as part of this process. Now, all states and territories and the Commonwealth, we have our various fiscal challenges. The Commonwealth certainly has its challenge in this area but our response to that is not to increase taxes to balance our budget. Our view is that you don't need to increase taxes to balance your budget. We believe you need to control expenditure to balance your budget. I said it in this room within days of becoming Treasurer, where I put the focus on the expenditure problem, that is still my absolute unerring and unwavering view. It's expenditure that we need to address principally to address the budget challenge over the next 5 to 10 years and to address the revenue side of things, well, that's why you address growth. If you address growth and economic policies to drive growth, then that will address the growth in revenue that you need to ensure that the surplus arrives on that day, where expenditure is less than revenue.

QUESTION:

Treasurer, there's a suggestion that if we looked at giving a share of the income tax to the states, that would allow the Government to potentially raise the GST but then to use that 5 per cent raise – if it went up to 15 per cent – that 5 per cent to offset tax cuts either at the business level or the income tax level.

TREASURER:

Of course.

QUESTION:

Is that what's come out of today's meeting, that there is more of a consensus that that's a good thing to be doing and do we have a clear idea if it would mean broadening the GST base or whether it would mean raising the actual rate?

TREASURER:

They're all details of individual proposals. What came out of today, I think, was a clarity of objective, a clarity of purpose. The purpose of any change in the tax mix is to deliver tax cuts. So, if you're making a change to one tax, the purpose for that is to take all the revenue that is created by the increase in that tax to deliver tax cuts, particularly in personal income tax and corporate tax. Now, that is what will help the tax system be growth friendly. So, the suggestion that this would be done to increase expenditure – well, that is not an objective that is now part of this discussion. Now, there may be different views about that amongst the various states and territories and I acknowledge that. They still have other objectives that they would like to see pursued through other processes and of course, they have their own opportunities to change their own taxes should they wish to do so. And many states have. South Australia have engaged in some tax reform. New South Wales has made a major announcement today. Western Australia has done things in the past. So states will make their own decisions about those issues, but the fundamental line is, the Commonwealth Government, the Turnbull Government is not in the business of increasing taxes to increase expenditure – that is not the path to budget surplus. The path to budget surplus is to control your expenditure and I will have more announcements on that next week with MYEFO and to grow the economy.

QUESTION:

Do you see that this could only be put in place before the election? Or could an agreement come between the Commonwealth and the states before an election and be enacted by legislation? Do you think this has to actually have a mandate from the Australian people before you went about, say, raising the GST?

TREASURER:

Any potential changes in this area would need to be the focus of an election.

QUESTION:

As you say that, Treasurer, everyone has a different, I guess, approach, but was there anyone in today's meeting that point-blank refused to raise the GST?

TREASURER:

That wasn't really the nature of the discussion. The nature of the discussion today was - what are we trying to achieve in the discussion about tax? There are some who had a view that you need to increase taxes, and I'm sure Victoria and Queensland wouldn't mind me referring to it because it was their proposal, that we should increase the Medicare levy to provide additional funds for the states to spend on their priorities. Now that is a tax and spend approach. So, that was their approach. Other states thought that raising the GST and taking the revenue from that to support spending in the states was another proposal. But there are other states, together with the Commonwealth, who are saying: 'no, if you're going to make changes to taxes, then the increase in one has to be offset by reductions in others', which meant the tax burden would not be increased.

QUESTION:

Some of the state Treasurers used quite strong language on their way in questioning your ability to be Treasurer and they were disappointed with your strong language leading up to the meeting. Was that sentiment brought in directly to you?

TREASURER:

Oh look these discussions are always robust. I think that's a good thing. I think it is good that these discussions come to a head – and they have come to a head today. What is good is, despite the strength of feeling, is we all got around a table today and discussed things in good faith and in the national interest – in the interests of the economy and growth and jobs. So, politics can get willing, these discussions can get willing. I'm no stranger to that and neither were any of the participants in the room, but the real point is this: we came together, we focused on an area where we thought we could get consensus to take the agenda forward. The thing we all agree on is we want growth. Growth is what we all want. As Treasurers, in state, territory and federal jurisdictions, because we know that's what's going to deliver the jobs. We know that's going to deliver the revenues for services in the future. Not by jacking up taxes but by ensuring that there is strong growth in the economy and that's why the references to the Harper reforms are really important. That's another part of that growth agenda. The innovation statement is another part of that growth agenda. This is why everything the Government is doing is designed to meet that objective. Tax is no different and the leaders will have the opportunity to canvass these issues further and where it comes to federation reform and how states and territories and the Commonwealth can do things better and who should do what and those sorts of things, well that has the opportunity, equally, to boost economic growth and to improve efficiencies and deliver better services at every level. So these are very positive discussions and the willing nature of politics, I think, is always part of the process, but I certainly continue to enjoy a very positive relationship.

QUESTION:

It's difficult to get a consensus obviously and there is still quite a way to go. Is it worthwhile going ahead with tax reform if it's done only at federal level or to be worthwhile, does it really have to be at a state and federal level?

TREASURER:

It's always best to work with as many partners as you can. Many of the issues though, at the end of the day, that we're discussing really do fall at a federal level and ultimately, it will be for a national government to take forward proposals that would come from this discussion. Where there are issues for states to take forward, they'll take them forward to their electors in due season as well. But look, we're trying to keep, I think, a consensus path on some of these changes, and to the extent that's possible, I will always continue to pursue it.

QUESTION:

Would you go it alone if you had to?

TREASURER:

I'm working on working together. Ultimately, it's the responsibility of the Commonwealth Government, on these issues to ensure that we have a growth-friendly tax system. There are issues that are beyond the discussion we're having with the states and territories, issues like superannuation and things like this. They sit wholly within the domain of the Commonwealth Government, just as payroll tax sits wholly within the domain of states and territories or insurance levies and things of that nature. They can make their own decisions on those issues and indeed will.

QUESTION:

Just on that, were they open to the idea of streamlining those various state taxes [inaudible]?

TREASURER:

Well, the tax reform discussion can include getting rid of state taxes, and states have the opportunity to nominate things that may go as a part of a package. That's really for them to nominate and for them to consider, and we'll consider that if they wish to put that forward. We had a paper today which went into some detail about the various state taxes and charges which was flagged and that was noted today. So, there's an opportunity for that. I think the core of what we're talking about today is simply this, and that is a growth-friendly tax system is one you achieve not by increasing the tax burden, but by changing the tax mix, and one that actually removes the shackles off business and individual taxpayers who are out there working, saving and investing and helping them to do that and backing them to do that better than the current system does right now. We remain on that task. We remain on that task together and I thank the state and territory Treasurers for being in that task with me.

Thank you.