4 May 2016
Transcript - #2016075, 2016

Interview with Ray Hadley, 2GB

SUBJECTS: Budget 2016 - A National Plan for Jobs and Growth

RAY HADLEY:

We go straight to Canberra and the Treasurer is online. Scott Morrison, good morning to you.

TREASURER:

G'day Ray, good to be with you.

HADLEY:

Well um, I think you've come out of this pretty good. How do you feel after reflection over night?

TREASURER:

Well the job I had to do last night was to set out this economic plan, it wasn't just another Budget. I mean I think people expect, you know, before an election or something like that, I would have stood up there with a show bag full of goodies and put all the sweeteners out. But I knew when I was putting this Budget together that's not what the country needed, it needed a plan for jobs and growth. And we've done some tough things in there, I mean we've done the thing on closing off access to those very generous concessions for people with very higher superannuation balances and we've gone after the multinationals, $3.9 billion we'll raise. And we've got a new penalty rate of tax for those who try to shift their money offshore to not pay tax.

HADLEY:

Is that the Google tax that we've heard about?

TREASURER:

Yeah it is. That's what they called it in the UK and we've had people over there for some time looking at that. And I caught up with George Osborne who brought that into place over there, and had a good chat with him about that when I met with him earlier this year. And it seemed like a really good idea so we've taken that on. But at the same time, where we've raised revenue for things like that, we've put it all back in to reducing the tax burden on small and medium sized businesses and we've broadened out that middle income tax bracket because we think if you're on a middle income – which includes people on the average full-time earnings – you should be paying 32.5 cents marginal tax rate, not 37.

HADLEY:

Okay let's get animated. This deficit of $37.1 billion, you're predecessors – I'm not talking about Mr Hockey but those before you on the other side of politics – kept promising deficits via Wayne Swan which were never achievable.

TREASURER:

Surpluses, yeah.

HADLEY:

Surpluses, I'm sorry. And even when they said they'd have a deficit it was always much larger than they predicted. So how confident are you that it will be $37.1 billion?

TREASURER:

Well we've been pretty up front with people, I mean we've revised down our forecasts around the economy, even just slightly down on the statement we gave in December, and last December I also revised them down because I thought they were a bit too optimistic and I think the forecasts we have now are below the long-term trend, so I think it's a much more honest appraisal of where the economy is at, and I think the figures are a lot stronger.

But the other thing I haven't done, Ray, is I haven't gone out there and spent money based on rosy forecasts into the future. I mean where things improve, then that will go straight to the bottom line, it won't go into funding higher and higher levels of spending because spending  as a share of the economy has come down from 25.8% to 25.2%, the deficit comes down to just 0.3% of the entire economy, which is $6 billion, in four years. So we keep on that credible path but we also keep supporting things that need to be supported in health and education, but not be sort of throwing money around, promises that are paid for with money that's not there. The money we're spending on these things we've saved, it's not through higher taxes, we've actually saved it so I know I can commit it to health and education and to roads and dams and things like that.

HADLEY:

You've banged on with me about the Government spending and you say at 25.8% of GDP, that's where you're aiming. Was it always under 26% that you were looking at?

TREASURER:

Yeah well when I came into the job last year we were heading toward 26.2% and that was higher than it was in the GFC. Now in the first statement that we did last year we got that back on track at 25.9%, in this now we've got it at 25.8%, and we'll get it to 25.2% by the end of the Budget and Forward Estimates. But Ray I still think that's too high and I've always said that we've got a spending problem not a revenue problem and there have been plenty of people who've tried to beat me up over that but I stick to it, I think that's what we've got to control. I mean businesses, your listeners live within their means and I think they expect the Government to do the same, you're right.

HADLEY:

Okay so you pulled this rabbit out of the hat with superannuation, the $1.6 million cap on tax free retirement balances and a 30% tax on the concessional superannuation contribution, when they earn more than $250 grand a year. Now they say only 4% will be impacted the other 96% are either the same or better off. But I think I heard someone say this morning that the number of people impacted is fewer than 120,000. Is that correct?

TREASURER:

That would be right, I mean we're raising $6 billion in extra revenue from closing off those concessions for those with very wealthy accounts, so after the 1st of July [interrupted]

HADLEY:

So they're travelling alright anyway?

TREASURER:

Yeah look at $1.6 million you're going to be earning between about $80,000 and $100,000 in income, it's estimated. Now what we know is that at $1.6 million you're going to have earning that are four times what the single aged pension is. And you've got assets in that fund that are twice the cut off point for accessing the pension. So we go: if you're going to have money in a retirement fund where you don't pay any tax on it, well that's the limit on it. Now it's your money so you can go and put it where you want. You can transfer it back into what's called the accumulation account in superannuation, where you pay 15% tax on the earnings or you can go and spend it anywhere else you like – I mean it's your money. So no one's taking the money off them, it's theirs, they've earned it, good for them and I'm thrilled that they've done so well for themselves. But that doesn't mean once you've got over $1.6 million that the taxpayer's going to give you a tax free saving.

HADLEY:

Well because it impacts on so few people, in general terms around 4% of the total population of superannuants, we won't hear too much criticism of that. Now because of your previous portfolio, $2.1 billion saved from the welfare budget. And you're cracking down on the DSP as you should, and you already started cracking down when you were in that portfolio, and that must continue. You're talking about 30,000 people having their pension reassessed. But the last time I checked we're still talking about 750,000 – 800,000 people are we not?

TREASURER:

Yeah but it's coming down and that's the first time we've seen it in a long time and we're going to continue to tighten up on that. But the changes we're making in those areas, the other thing we're doing for anyone coming onto a benefit payment going forward, they won't get the carbon tax compensation anymore and we think that's fair enough – we got rid of the carbon tax so why would we have a carbon tax compensation for it? And so all of the savings that we're getting from that, which is around $1.3 billion, we're putting that back into a special fund to pay for the National Disability Insurance Scheme, because what Labor left us with was a gap and it starts when the full scheme comes into full operation at around $4.4 billion and it goes up to $6.9 billion. So we've got a lot of shortfall to make up. So where we make gains in the social area we're going to invest that back in ensuring the NDIS can be there and delivered.

HADLEY:

And that will be fully funded at $22 billion?

TREASURER:

Yeah we will meet that commitment but we've got to continue making savings so that we can continue to do so.

HADLEY:

Now the one that I think you're most proud of, because again of your former portfolio, trying to get young people under the age of 25 into the workforce. You and I have spoken about this. From the 1970s we've now got third generation children who are part of Centrelink. I mean: pop was on it, dad was on it, I'm on it.

TREASURER:

Yeah you've got to break that cycle.

HADLEY:

So what are you doing there with this money?

TREASURER:

Well the worst figure I saw when I was in Social Services was 12% of 15yo and under children and grand kids are growing up in jobless families. That was back in 2012.

HADLEY:

Just say that slowly again.

TREASURER:

12% of kids aged under 15 in 2012 were growing up in a jobless family.

HADLEY:

12% of children under 15.

TREASURER:

And you know the research shows that if they don't get a job by the time they're about 22-25, 40% of them will always be on welfare. Now if you want to hit the welfare problem over time the best thing you can do is to get young people into jobs so that they become self-reliant and they don't live a life on welfare. And you know that saves the taxpayer a lot of money, obviously. But just think about the human cost of a life that isn't in a job. What we're doing Ray is look, you've just got to try things in this area until you get it right. It's not just another one of those keep-them-busy training programs.

What we're doing is we're going to leverage the dole, basically. We're going to say, young people are telling us we don't quite get what the expectations of employers are. People might think they should and the rest of it. I was lucky. I grew up in a home with my mum and dad who supported me in understanding these things. Not every Australian has had that privilege. And you get mentors alongside them. You've been to I don't know how many events Ray, Father Chris Riley is a good example of people who are out there helping these young people get these skills. So we're investing in that. Then they go into a trial program with a real employer, so it's real work for the dole where they get their welfare payment and they get a slight top-up to be in that job and to be working in that job. And then after that the employer can take them on and we'll keep paying them a $6,500 to $10,000 subsidy for the wage, and then the employer tops it up. And that happens for six months and then it's up to those two. We've given the opportunity to learn those skills, get to know each other, the business isn't taking the risk like they were before, or the cost. And at the end of that period, hopefully the young person is in a job.

HADLEY:

What if they're not? Let's just say that the employer does everything they can but because he's come from a culture or she's come from a culture of just being on the drip, what happens if that happens?

TREASURER:

Well that means we would have failed, and we will all have failed in that. And that young person most sadly would have failed as well. And that's why Ray we're going to give this everything we can, and I thing we've got to keep trying things in this area until we get it right, because there is so many good people out there. Small businesses tell me, they really want to give young kids a go, they really, really do. But they need a bit more support and help to ensure that they can do that without having to wear all of the risk and all of the cost and we've got to get those mentoring programs and all these sorts of things operating which is what this supports and what I'm saying to small businesses, you know, I know you want to give this a go, so Give it a go, and for young people, here's your chance, don't blow it.

HADLEY:

You're a Politian more than anything else, I mean I know your, you know.

TREASURER:

For my sins Ray.

HADLEY:

Yea I know that, I know you'd like to think you can always do the right thing, however, it is a Budget as you've already said, in extraordinary times, now, extraordinary would mean that on July 2 we go to the polls that's extraordinary, that we have a Budget, you know, directly after. We have an election directly after a Budget.

TREASURER:

Not even Laurie Oakes can remember when we've had one like that.

HADLEY:

No, I heard him say that this morning, so, um, you, you are predicting, the National deficit will be down to six billion dollars by 2020, which you have described as, I know your certainly optimistic sort of person, as realistic optimistic now I don't share your optimism for that figure by 2020, so I would think that if you get another crack at a budget, um, at some time in the next twelve months it may be a bit more savage than what we saw last night, given that you'll be not in the, or close to the end of a election cycle.

TREASURER:

Oh well Ray that's your commentary, um, um, look, the Budget I brought down last night I think is the right set of decisions for what we need to do and most importantly I hope it gives particularly small  to medium sized businesses and people in middle income families and so on, hard working, the backing and encouragement, I mean, sometimes Budgets are quite physiological as well, people need to know to put in that effort in every  day, they can feel like I'm just doing this all on my own. Well, what Malcolm and I said last night was we're backing you in, we know that you're the hope of the side and if they don't keep doing what they're doing right now, then, then you could be right Ray , those figures may not be achieved, and that's why I'm saying to them I'm backing you in, um, weather, it's in the tax cuts for small businesses or expanding that middle income tax bracket, supporting young people to get in to jobs, and one other thing I should mention if you're aged between 65 and 75, currently you can't put in to your super once you've gone over that age, we're changing all the rules and we're allowing people to keep doing that all the way up to when their 75 and what that means is, let's say, not just from the income they earn from working, let's say they downsize their house, and there, let's say their 71 or 72, um, and they've decided to down size, sell their property , and they've got $100,000, that they may have made by downsizing, now, right now you can't go and put that in to your tax free earning retirement savings account, um, you can now, because we've made that change, because we know that people need greater flexibility until a much later age in life and we think that's another fair change.

HADLEY:

Given that you've spoken to your colleague in the UK about this so called Google tax, um, you know, how smart your Treasury people are and how smart the ATO through the commissioner is, while you're working to make sure that they pay their fair share, they'll be working feverishly to make sure they don't.

TREASURER:

Well its, no mate, I've been in three portfolios now, um, in Immigration, in Social Services, and Taxation you always come up against that, people always try and get around the system, and that's why you've always got to be on your game on it you've always got to be tightening it up, and you've always got to be trying to keep one step ahead and the same is true for multinationals, I was really impressed with what George Osborne did in the UK, and when I had the chance to talk to him, I was very convinced this is where we needed to go and, uh, so that's where we've gone, and so the only penalty rates in this budget is the penalty rate on multinationals for not paying their tax.

HADLEY:

Ok, um, just when the reserve bank announced what they were doing, down to one point seven five, the official cash rate, uh, something you can't change.

TREASURER:

No.

HADLEY:

It's an independent decision, but, how did it strike you, were you happy about that, were you buoyant going in to your Budget.

TREASURER:

Well, Glen was doing his job, yesterday, and I was doing mine. What the Reserve Bank decision was mainly about was inflation, um, Glenn said very positive things about how our economy is transitioning and the job growth we've had, 300,000 and how it's diversifying, and all of those things, uh, but for some time, you know they've been keeping rates where they were, and they were concerned that a rate drop could have an effect on the housing market in particular, and it could overheat, now late last year the banking regulator made some changes where they, um, put some tighter controls around lending, and what that has done has taken a bit of the heat out of the real estate markets in Sydney and Melbourne and clearly the reserve bank thought they could now having has those changes ease the cash rate without having those consequences, but it shows that what APRA did at the end of last year, shows the darkness of what Labor is planning to do on negative gearing, which I call a housing tax, because it is a housing tax, um, it's a housing tax because if you own an investment property and remember it's at least one in five police use negative gearing, one in five right across the country, and I wouldn't call them fat cats, and if Chris Bowen wants to keep calling them fat cats that's well I'm sure the boys in blue will not take that kindly, but we don't think that should change, I said that in the Budget last night, because what it will do is it will undermine not only the value of the investment properties that they own but it will undermine the value of every house in Australia and if you want to crash confidence in the economy then go and put a housing tax on someone's house.

HADLEY:

Incidentally, um, news that you can't, uh, have any say in, but it's just breaking news on international media Donald trump has won Indiana.

TREASURER:

Oh dear, there we go, well shapes up for a pretty interesting convention, doesn't it?

HADLEY:

The world may be a very different place by this time next year.

TREASURER:

Well what will be happening in this country though is, I mean last night I talked about how we will be growing at three percent, that's and extra $40 billion added to the Australian economy last year 300,000 jobs but importantly 50,000 extra jobs for young people in the last 18 months, I think Australia is batting well above its average here in this sort of an economy, and that's because Australians are doing the hard things every day and we know that the future is about them keeping on doing it, not about governments and not about politics, and, I mean there will be all sorts of reports on this Budget and you know, people will say it's between the rich and the poor, and all of this ideology and rubbish frankly, this is just about a plan that's going to back people in and, um that's what we need.

HADLEY:

Just finally a couple of emails: Dawn says "I heard last night ASIO funding reduced by $15 million, which isn't much, can you ask the Treasurer why, I would think we would need to spend more money on security not less".

TREASURER:

Well we have, we have significantly invested, um in our security agencies including ASIO and so they have everything they need and they will continue to have everything they need and every time they've come to this Government and asked for that they have received it I sit on the National Security Committee when we've been making those decisions now for some years and we have been backfilling the massive cuts, whether it was to border protection, ASIO, ASIS all of these agencies, they are better resourced today than they have been since the Howard government and, um, because we believe we have got to keep people safe Ray, and they will get everything they need.

HADLEY:

I always get an email from a screaming left winger in Canberra in Torrens called Mark Simpson, now Mark Simpson, from his emails would be further left than anyone in the Greens party, and therefore he would believe in a whole range of things that possibly you wouldn't believe in, but he says: "So your boyfriend has given up".

TREASURER:

(Laugh).

HADLEY:

So now I'm in some sort of relationship with you according to Mark Simpson, while he would absolutely think that was fair and equitable, in other circumstances, you and I aren't allowed to be boyfriends, "So your boyfriend has given the top 10 per cent a tax break and the bottom 60 per cent nothing. Why?" says Mark Simpson, the raging left winger who is the occasional listener to the program and as I said to you before Mark, do me a favour, do the Treasurer a favour nick off, stop listening and everyone's happy .

TREASURER:

Well the other thing is I think people are so over these, these left-right arguments and all of this sort of thing, honestly, I think people are so over it, I mean Bill Shorten's out there saying, "oh you know millionaires and all the rest of it", tell you what Bill Shorten hangs out with a lot more millionaires than I ever have, I mean, he went to Xavier, I think in Victoria, I went to a public school, so mate if he wants to have that argument, well I suppose we can, but I'm frankly, if people get to go to private schools, good for you, your family has invested and giving you the opportunity to go there, I mean honestly, these people have just got to move on.

HADLEY:

I think the class war is crass, whoever enunciates it, whether it's you or Mr Shorten, the class war is crass, and it is beneath contempt.

TREASURER:

Well it's just not us, it's not us.

HADLEY:

It's not Australian.

TREASURER:

No.

HADLEY:

The class war's not Australian, it belongs on another planet, not this planet, anyway I think we've just about covered everything we needed to cover, and congratulations on the Budget and one of the things I've said to you previously is that, um, you are you know, for all your other faults, a polished media performer, and you present particularly well, however, have you seen the front page of the daily telegraph, today, and I saw Lisa on the Today Show this morning take you to task about the 007 photograph, someone at the, at News Limited has conned you and I don't know who it was but obviously, you know the holding of the tie like James Bond, 007, and we had a bit of fun with that yesterday.

TREASURER:

My collar was down Ray, my collar was down.

HADLEY:

I know the collar was down, I know the collar was down Treasurer, but the caricature, that is written about an illustrator on the front page of the Telegraph in case you haven't read the side of the paper where you're adorned as superman, Clark Kent, ScoMo, in brackets abs not to scale.

TREASURER:

(Laugh) I can't.

HADLEY:

So the abs are not to scale.

TREASURER:

Just in case anyone needed that, are in doubt.

HADLEY:

In case his wife or family parents, loved ones think that all of a sudden he's been working out in the federal parliamentary gym, it's not the case, the abs are not to scale.

TREASURER:

That is absolutely right.

HADLEY:

All right then, nice to talk to you.

TREASURER:

Thanks Ray.

HADLEY:

We'll see you next week.

TREASURER:

Cheers.