11 December 2015
Transcript - #2015068, 2015

Interview with Neil Mitchell, 3AW

SUBJECTS: Bill Shorten; Council on Federal Financial Relations; National Platform for Economic Growth and Jobs; Budget; fall in unemployment; creation of 71,400 jobs for Australians in November; East West Link; national security; National Innovation and Science Agenda; Harper Review; Release of section 46 discussion paper

NEIL MITCHELL:

Scott Morrison, good morning.

TREASURER:

Good morning, Neil.

MITCHELL:

Do you think it matters that Bill Shorten got caught texting and driving?

TREASURER:

Of course these things mean that the police should do their job as I am sure they will but look I am the spending cop – I am not the traffic cop. So, I will leave those matters to the traffic cops.

MITCHELL:

I have been trying to assess from the audience does it matter that the alternative Prime Minister does something so silly?

TREASURER:

All politicians are human beings and they are subject to the same rules as everybody else and I am not going to, you know, pile onto this issue. Bill will deal with that and that is for others to make judgments about.

MITCHELL:

Ok, right in your area there is a suggestion of a GST deal with the states coming out of South Australia giving states a percentage of income tax. Now, how would that work?

TREASURER:

What was discussed yesterday was over the last 15 years, since the GST was introduced, all the money of the GST went to the states and what the states have said to us is look, GST revenue is rising at a different rate to income tax and in recent years income tax has been rising more rapidly. What they are looking for, say next year it will be about $60 billion that they would get from GST, going forward what the difference may be that they get $40 billion from the GST and $20 billion from income tax. It is not about raising the overall quantum of the amount of revenue they are getting, it is about changing where that mix of revenue comes from. It is a bit like diversifying, spreading their risk, the states are looking for a more predictable, stable, growing revenue base. We are happy to look at that as part of this discussion. The other important part is this, what they also agreed to yesterday is looking at changing the tax mix. That means that any discussion about changing the tax mix is about cutting taxes, particularly personal income taxes and company taxes. There is no contemplation by the Commonwealth Government that any revenue raised from any changes in any taxes, any increases in consumption taxes, would be used for any other purpose than reducing income taxes, reducing company taxes net of any compensation which rises with indexation.

MITCHELL:

Ok, so you would increase the GST but cut the other areas?

TREASURER:

This is the only thing that the Commonwealth has ever been contemplating. It is about getting a better tax mix which takes the shackles off people, particularly on personal income tax and we have said before, next year the average wage earner is going to be in the second highest tax bracket, our company tax rate is obviously higher than many of the other countries we compete with and the tax system has to be growth friendly. What was great about yesterday is all of the Treasurers agree on one thing - we have got to grow our economy. That is the issue we have got to address. Peter Costello said many weeks ago, if you are going to do tax reform you have got to decide what is the problem you are trying to address? Well, the problem we are trying to address is we need greater growth and we have to have a tax system that supports that.

MITCHELL:

So, if the states were to, if they were to agree to an increase in the GST and they still have the power of veto, as I said, if they agree to the increase it would on the basis that they got a share of income tax.

TREASURER:

Yeah, their tax base from the Commonwealth would change in composition but where they would gain is that if you have a tax system that is more tax friendly then the growth in the economy would lift everybody’s revenue.

MITCHELL:

But part of the equation is an increase of the GST or a spreading of it as well?

TREASURER:

Well, the GST could have any number of different permutations added to it. No one went to any particular place on that yesterday and there is the option of not doing that at all. What is important is we agree that the problem we have to solve is growth and that growth is what is going to drive jobs, growth is what is going to support increases in revenue for all governments in the future but we will need to do that not by increasing the tax burden but making the tax burden in a way that helps the economy grow.

MITCHELL:

We’ve been talking about the GST a lot over the recent months and there has been the sense that it was off again on again, not favoured, favoured. Where do we actually stand at the moment? Is an increase in the GST still possible?

TREASURER:

Look, all the options are on the table but the important thing is this, Neil, the only way something like that would be considered and what was clear from yesterday and the agreement was that would only be accompanied by reductions in personal income tax and serious reductions in personal income tax. The whole point of doing this is putting people in a better position. We are not doing this, or contemplating this to fix the Budget problem. We are fixing the Budget problem by controlling expenditure. That is how you fix the Budget, you have got to control expenditure and grow the economy to grow the revenue base. So, the suggestion that these things are contemplated as a way of dealing with the Budget issue – no that’s not our plan.

MITCHELL:

Ok, controlling expenditure means cutting, which means you will be working between now and the Budget on how to cut.

TREASURER:

And we will have announcements next week with the Budget update and we will be doing that then and we are making sure when we go into that process that we will be washing our face with all the additional expenditures that came on since the Budget. So, things like the refugee intake and the reversing the bank deposit tax and the $1.1 billion extra in road funding and of course last week’s innovation statement. All of this, sorry, this week’s innovation statement – it has been a long week – all of this is about ensuring that we pay for the things that we have prioritised.

MITCHELL:

When you look at cuts is everything on the table or is there anything that is untouchable?

TREASURER:

Wen we are looking at, sorry, I missed that?

MITCHELL:

Cuts.

TREASURER:

Income tax cuts are talking about?

MITCHELL:

No, no, cutting expenditure.

TREASURER:

Well, over the last two years I think we have demonstrated we have looked at a whole raft of areas…

MITCHELL:

Yeah, you backed down on a few too.

TREASURER:

And we got a number through - well we didn’t back down on them, what happened was the Senate rejected them.

MITCHELL:

The co-payment, the Medicare co-payment?

TREASURER:

Well, that wasn’t passing the Senate. The Labor Party and the Senate ganged up to block a whole bunch of saving measures. That is history, you move on, you repackage the sort of thing you are looking to save, that is what we did on changes in my previous areas and we got other saves through. We had more than $60 billion worth of saves passed through the Parliament and passed through the Government over the last two years.

MITCHELL:

So, is anything untouchable?

TREASURER:

Well, for example, pensions I think we’ve been pretty clear that we have done everything that we plan to do in that area in terms of where we are at at the moment. We want to give pensioners that certainty and we made some changes in the last Budget and that was our final word on that.

MITCHELL:

Do you still think – so pensions are untouchable, anything else?

TREASURER:

I think we have made it clear that pensions, we have had the reform that we put forward, now we are looking at other issues in superannuation. I have made it really clear that the retirement phase of that is a very sensitive area and we are very attuned to that. You always try to spend money better, you always try to spend money better. That is our job, we have got a spending problem, Neil, and I have been saying that since I became Treasurer. My position on that hasn’t changed. Just because we are talking about how we make the tax system more growth friendly doesn’t mean that we haven’t remained absolutely focused on the issue of keeping spending under control and that remains my absolute focus.

MITCHELL:

There is still the view that you can grow your way out of the problem? That economic growth will actually fix it?

TREASURER:

Well, there are two components, you have got to control expenditure and you have got to grow the economy. The only point I am making is you don’t tax your way out of the problem. That is what you don’t do. You control your expenditure and you grow the economy whether it is through the innovation statement or whether it is through the $50 billion national infrastructure plan, or whether it is what we are trying to do to make the tax system growth friendly, the response to the Harper inquiry, which is looking at competition reforms and looking how that can boost economic growth at the state and territory level in particular. All of these things we are doing to grow the economy and grow jobs. Yesterday’s jobs figures I think were a further encouragement that that is what it has to be about. More than 71,000 extra jobs last month, that is what it is about at the end of the day – jobs.

MITCHELL:

So, those good job figures, does that mean we don’t need the debate on whether to cut, or reduce or drop penalty rates?

TREASURER:

Look, there will be a Productivity Commission report coming out shortly and that will canvass a range of issues and I will leave those issues and that discussion for then and what goes from there. We always have to ensure that we are focussed on policies that continue to improve the performance of the economy. You can never give up on that, you can never give up on controlling expenditure. John Howard used to talk about the ever receding finishing line on these things and he is absolutely right. You have got to keep marching towards that to ensure that you get the growth which creates the jobs.

MITCHELL:

We have burnt through $1.1 billion in about 18 months not building the East West Link.

TREASURER:

I know it’s amazing, it’s spectacular in terms of a decision by a state government and they are the ones saying yesterday they wanted to increase taxes to pay for state government expenditure, the Victorian Government; so what - they can spend another $1.1 billion on roads they won’t build?

MITCHELL:

They want several billion from you now for the new toll road – the Western Distributor. What are their chances?

TREASURER:

They have put forward a business case to Minister Truss and we will look at that and we will work that through the normal process. That is what we have been saying about infrastructure all the time. We are very disappointed that they didn’t proceed with the East West project and the thousands of jobs that would have come from that and that they have wasted $1.1 billion in that vanity. I think that really does undercut the public’s confidence in how this state government spends money. For them to argue yesterday, as the Premier did, that they want more tax money from the Federal Government I think just beggars belief. They should be spending it a bit better I would say and $1.1 billion to build nothing I think goes down as a first.

MITCHELL:

What do you think about, on another area, the proposition of jailing terrorists indefinitely if they are seen as…

TREASURER:

On the preventative detention? Well, we are in very new times when it comes to these issues and police in these situations and federal authorities are under enormous pressure to ensure that they take preventative action wherever they can to avoid the sort of horrific things that we have seen both here and overseas. These laws need to be sensible, I think we are going down exactly the right path to ensure that the authorities have the powers they need to protect the public. I think that is what Australians expect of them. I think Australians are not naïve to the threats that we face and I think they have to have absolute confidence of any of the such powers would not be misused and I have great confidence in our police and our federal authorities to not misuse such powers. I think where they need powers to protect the public then I am always in support of giving them those.

MITCHELL:

Potentially here you could have a 14 or 15 year old child in jail indefinitely?

TREASURER:

A 15 year old child shot dead a police department employee in New South Wales, so that is my answer to that.

MITCHELL:

So, we have to accept it?

TREASURER:

Well, this is the world we live in, Neil. It is a shocking and horrible world when things like that happen but we can’t be naïve about it.

MITCHELL:

Why is Victoria’s unemployment rate going up when the other states are dropping?

TREASURER:

That is in this set of figures, in the last set of figures they actually went the other way. The National Accounts show that the Victorian economy, along with the New South Wales economy, is the one really benefitting from the transition that is occurring from the investment phase of the mining book to our more diversified economy. Now, I hope to see better figures there in Victoria going forward. What we are seeing is the service sector economy really starting to drive things. It is particularly the case in New South Wales but I think in Victoria that is also helping. The economic growth, while it was 2.5 per cent in the National Accounts. now that is below the long term average but what we are seeing with GDP growth this time round is it is more job intensive growth because it is in those service sectors and that is why, I think, we are really seeing this strong job performance that we saw over the last couple of months is the transition of the economy, is transitioning the economy into a lot more job intensive areas.

MITCHELL:

A caller off air wants to know if you have talked to the state Treasurer’s about cutting payroll and property taxes as part of a change in tack?

TREASURER:

Yeah, we have. That will ultimately be up to states. I think one of the things that happened last time with the GST and that tax reform debate is that there were a lot of promises made about state taxes that were supposed to do and some of them didn’t go, as you and I know. I think the public is a little sceptical about that. This is why I am a lot more focussed on the things I know I could cut, like personal income tax and company tax but we did say to the states yesterday if there are taxes that you want to cut as part of a tax reform package then nominate them and we will work that through. Payroll tax, that is up to the states but equally things, stamp duties and how they apply to particular transactions that can be done, insurance levies, insurance taxes – all of that is possible.

MITCHELL:

The Prime Minister, I noticed said the economy is humming along well, the employment figures are better. Is this a tribute to the Abbott Government?

TREASURER:

What it is a tribute to is the Australian economy and the Australians who go out there and work and save and invest every day. Whether it was when Tony Abbott was Prime Minister or Malcolm Turnbull. The policies we have been putting in place are about trying to back Australians and free them up to do the things that they want to do. In the last Budget, the ‘have a go’ Budget which I had a key part in as a member of the ERC working together with Tony and Joe, I mean that had an impact and backing people, particularly small businesses. I am really pleased for those 71,000 Australians who got jobs. They are the ones I congratulate. I tend to credit the people who got the job and the person who gave them the job which was the business that took the risk and said here is a job, mate. I think that is great – 71,000 Australians…

MITCHELL:

I agree.

TREASURER:

The best form of welfare that you can ever get which is a job.

MITCHELL:

Tony Abbott seems to be worried about history being rewritten. I mean if we are in a good shape now it is thanks to the Abbott-Hockey team, isn’t it?

TREASURER:

Well, I have been part of both governments and pleased to have served in both and continue to serve happily in this one. What people know is that since the last election, jobs growth has gone from 0.2 per cent to 3 per cent. Now, that is a great outcome. Youth unemployment today is lower than it was at the last election and we have all played our part in that. Tony, Joe, Malcolm, myself, the whole team, Julie, Christopher – it has been a team effort and what I do know is that under the Coalition we are doing a lot better today than we were at the last election.

MITCHELL:

Is Tony Abbott proving a bit of an embarrassment or a distraction?

TREASURER:

I think people are getting terribly over excited about Tony. Tony has served the country incredibly well as Prime Minister and as a Member of Parliament and continues to do so. I am sure that will remain the case and good luck to him.

MITCHELL:

So, he is not a distraction?

TREASURER:

He is not distracting me. He is not distracting the Prime Minister.

MITCHELL:

Well, the Prime Minister got a bit grumpy the other day, “no more questions on Tony,” he said.

TREASURER:

Because he is talking about innovation. He is talking about growing the economy.

MITCHELL:

Well, that has really resounded, hasn’t it? The public are running up and down the streets saying, “oh, innovation, terrific.”

TREASURER:

Well, those who are actually involved in innovation; who are taking those risks and starting businesses and employing people in those businesses are very excited. I have been to many of them.

MITCHELL:

This is what I couldn’t understand, they can go bankrupt, owe a lot of people a lot of money, come back a year later and start all over again. That is extraordinary.

TREASURER:

Well, are we going to have bankruptcy laws in this country which prevent a business from surviving those difficult times…

MITCHELL:

But if it protects creditors we need them because this is an invitation for [inaudible] and crooks.

TREASURER:

But what about jobs, Neil? The system at the moment actually says the best thing you can do when a business is in trouble is to shut the business down for the banks. That is what the current system does. What we’re saying is, let’s have a go at actually seeing if this business can survive and the people who work for that business can keep their job.

MITCHELL:

No, no but you are also saying you can go bankrupt and come back a year later.

TREASURER:

It’s not as simple as that, it is not as simple as that. There are a whole range of mitigations that they have to put in place to work themselves out of bankruptcy.  We haven’t gone as far as the Chapter Eleven situation in the United States but what we are saying is, when a business gets into trouble we want to help that business get out of trouble and get back on their feet and to protect the jobs that are in that business and the growth that can be achieved in that business.

MITCHELL:

The Grand Mufti says Tony Abbott’s comments are helping to promote terrorism, what do you think?

TREASURER:

I haven’t found many of the Grand Mufti’s comments very helpful and I think what is very important is that we don’t play into the hands of those who want to divide Australians – whoever may be doing that. Now, I think Tony has made some observations which have been consistent, which many others have made – in fact I have made in putting them in different ways – but I think the constant, sort of, attempt by some to try and create these divisions and create controversy and conflict, often about statements which frankly aren’t in direct contravention to what others are saying, I think, only just whips the issue up and doesn’t help the very sensitive issues that the Government is trying to manage here and that is the Prime Minister’s focus.

MITCHELL:

But is Tony Abbott aggravating it? Is he opening a gap?

TREASURER:

Look, Tony has been saying things he has said consistently for a long period of time. I have echoed many of those comments but said them in different ways and we all chose our own words and how we choose to describe it. The settings that the former Prime Minister put in place whether it was our involvement in the Middle East, whether it is the security settings that we have here at home - - all of those have been maintained and have been added to under the Turnbull Government and I think he would be very pleased about that. So, that’s I think where we sit.

MITCHELL:

Thank you for coming in. Just finally, I was talking to one of the cut price chemist people in the first half hour. They tell me that the price of prescription drugs, subsidised prescription drugs will drop a dollar for everybody from January – your doing?

TREASURER:

Well, that was the pharmacy agreement that delivered that and Sussan Ley did a great job in negotiating that agreement and to the Pharmacy Guild who worked with us. There were good positive changes out of that. The recent Harper Review laid the ground work, I think, for greater competition not just in that area but in many other areas too. I think we have got to remember that with the economy, it is those micro things, those small things, often, which deliver really big benefits for customers. Today, we are releasing the discussion paper on section 46 which is on those rules regarding competition law and that will be out for comment until February and that also addresses some of those issues but better competition is good news for consumers and for me people say well, you’re backing big business, small business – well, I am backing the customer. As the Treasurer I am going to back the customer and make sure that they get a good deal.

MITCHELL:

Thank you for coming in. All the best for the holiday season and for Christmas.

TREASURER:

You too, Neil, and to your listeners as well thanks for having me on this year.