8 May 2018
Transcript - #2018080, 2018

Interview with Paul Allen, Bloomberg

Subjects: Budget 2018

PAUL ALLEN:

So return to surplus a year early, 2018-2019 deficit smaller than expected thanks to a revenue boost but is that sustainable?

TREASURER:

Yes it is because it's based on the growing economy and particularly the strong growth that we'll continue to see in employment in Australia. Unlike many other countries, Australia has still not returned to that unemployment rate, which is the natural rate. So, there is further room for our labour market to expand and grow, and that's what really is boosting revenues over the medium term, and even over the shorter term. The initial commodity price improvements that we'll see have much more cautious forecasting. I mean that will all go straight to the bottom line. The longer term revenue up there is on the sheer fact of a growing strength of the economy.

ALLEN:

Much like last year though, there's some pretty heroic assumptions there…

TREASURER:

None at all…

ALLEN:

Two and three quarter per cent rising to three and a quarter, we're not seeing anything like it. Why are you so optimistic?

TREASURER:

Our forecasts are in line with the IMF, the OECD, the Reserve Bank of Australia, right across the board. I mean we have consistently forecast conservatively and that's why at each and every Budget update, we're actually presenting better than expected outcomes and that has happened again in the presentation of this Budget. We'll continue to be cautious on these things, even at the levels that we're talking about that is still below the longer run average performance of the Australian economy. So, no I wouldn't share that view that that outlook is overly optimistic, and in fact we've revised it slightly down from the December statement which is our habit.

ALLEN:

Ok, well we have tax cuts coming as well – $10 per week roughly for low to middle income earners – and that's what you say can be responsible and affordable. An election due in within twelve months – is that going to be enough to win over those voters?

TREASURER:

Well, what voters do is a matter for them to decide, and what we've got is a clear plan that we've stuck to over the last five years since we were first elected. We have reduced the level of welfare dependency, the lowest level in 25 years. We're now turning the corner on debt and paying that debt down, and we've been able to bring the Budget back into a very modest balance at this point. One year early. And we're getting on with the job of delivering essential services. So, that's a good strong record of achievement, but we've more to do, and we need to stick to the plan.

ALLEN:

In your Budget speech, you talk about the impact of the global financial crisis, the end of the mining boom and the [inaudible] taking a billion out of the economy, and here we have some tax cuts and no mention of preparing for future shocks. Is Australia adequately prepared for something say like the US-China trade war?

TREASURER:

Well, I don't share your assessment of us preparing, because what we're doing is putting the Budget back into a policy of balance, and reducing the debt. Now on top of that, we have the strongest financial system arguably in the world when it comes to our banking financial system, and its systemic strength, and financial stability strength. So, whether it's our banking and financial system, which weathered the global financial crisis better than anywhere else in the world, or the fact that our debt to GDP, at a gross level, peaks at less than 30 per cent, and there's plenty of countries that would love to swap places with Australia on those sort of mentions. I mean, where we stand globally, I think is very much the envy of many developed countries around the world.

ALLEN:

But you're still pushing to get all of your corporate tax plan through. Will that be your electoral poison giving tax cuts to people like the big banks who have really taken a pounding in the Royal Commission?

TREASURER:

Our bank levy will return to the Government in excess of $16 billion over the next ten years. And by the time our corporate tax cuts have reached the full wide economy effects, it will have delivered that much itself. So, the banks have effectively been carved out from that because of the way the bank levy operates but the broader economy-wide benefits of lower corporate taxes are obvious. That's why the US is doing it, that's why France is doing it, that's why the UK is doing it, that's why Singapore and New Zealand have already done it. I mean it's common sense economics and this will enable us to stay competitive.

ALLEN:

Ok, well I better let you get on.

TREASURER:

Thanks a lot.