9 May 2018
Transcript - #2018083, 2018

Interview with John Laws, 2SM

Subjects: Budget 2018

JOHN LAWS:

Scott Morrison's on the line. Treasurer good morning and welcome.

TREASURER:

G'day John.

LAWS:

How you doing?

TREASURER:

Well, it's been a busy night and it's been a busy morning, but it's always great to join you.

LAWS:

That's very nice of you, tell me, are you, obviously you are happy with, it's yours so you'd have to be happy with it, wouldn't you?

TREASURER:

Well, I'm pleased about a lot of things in the Budget, John, but if you indulge me for second, what I'm most pleased about is just how many Australians have been getting into work. Because what really underpins this Budget is the fact that according to the Australian Bureau of Statistics, we had on average more than a thousand jobs created every day in the past year and that means we've got people getting off welfare and getting into a job. When you go from receiving a welfare benefit to actually paying taxes that has a big impact on the Budget. That's what we're really seeing happening here. The stronger economy then means we can do particularly what we're doing for older Australians. We all go through this in our life and when you've got older parents, you want them to age with dignity and respect and you want them to be able to have all the choices that they want to have. We're all living longer. I think that's great by the way. I mean sometimes we talk about the ageing of the population in this country as if it's some sort of curse.

LAWS:

It isn't.

TREASURER:

It's not! Living longer and healthier, how good's that? But we've got to plan for it and we've got to understand that as people get older, particularly in advanced age. I don't want to see Australians not have the dignity that they deserve.

LAWS:

You're pledging $140 billion in personal income tax relief over a decade. The forward estimates have traditionally been taken over four years and they are notoriously unreliable as you would agree, you'd have to agree.

TREASURER:

Well over the last three, or six statements that I've been involved in John, they've been proved on each occasion.

LAWS:

Yeah, but they're not right.

TREASURER:

Well, they get better is my point. And the reason they get better is I always take a very cautious approach to what I think is going to come in on the revenue side. I'm very cautious on what I think iron ore prices are going to be and coal prices are going to be because they can have an impact on the Budget. I always try and stay on the right side of the line. So you know you always get an upside surprise not a downside one because that's what helps you manage the Budget.

LAWS:

Yeah, but the point is the $140 million in personal income tax relief over a decade, as I said the forward estimates have traditionally taken what four years? And they are notoriously, they are unreliable, how can we possibly put any faith in figures over a decade?

TREASURER:

Well John I think that's reasonable. That's why the Budget is done over four years and that hasn't changed. In recent years there's been a tendency for broader commentary and analysis and more generally on budgets to look at things over a longer term. You've got to consider the longer term but you're right, over a much longer term those estimates obviously are conditional on a range of things but over the four years let's talk about debt for example. Over the next four years, the net debt of this country will fall by $30 billion in actual nominal terms. That's actual dollars. Over that longer term it's forecast to fall by over $230 billion because from now, 2017-18 we start paying down the debt and we're doing that because we've got the Budget coming back into balance and we're no longer borrowing to pay for everyday expenditures like welfare payments.

LAWS:

Ok, but if you look at the most recent Mid Year Economic Outlook in the space of just five months there's been a huge surge in revenue defying the forecasts for five months ago, and yet based on that you've locked in ten years of spending. You know those predictions over a decade are pretty meaningless, aren't they?

TREASURER:

Well, they've got to be taken in context, John. If you're talking about the last six months in particular, we've had a real improvement in the current year and the next year and the reason for that is because what we expected on commodity prices, we've been conservative and that has improved and we've taken all of that additional revenue that has come in in taxes, which is largely going to come in in company taxes because of the commodity prices and we've let that go straight to the bottom line, which is very important. That's why particularly 2017-18 the year we're in and next financial year, the Budget position is greatly improved from where I was saying a year ago and indeed six months ago. But you always want the surprises on the upside.

LAWS:

Well, that's true, that's a good way of putting it. You're telling us to wait seven years for the big changes to tax. Do you really expect voters to sort of hang around that long and wait that long?

TREASURER:

Well, you've got to do what's affordable and what's responsible and if we continue to focus on building a stronger economy then there's an opportunity, I hope, that we can do things sooner than that. But I'm laying it out pretty honestly, that's what can be afforded to be done on that timetable and if you don't have a stronger economy then you put a lot of things at risk and the stronger economy means that you don't tax it to oblivion. We've put a speed limit on taxes in this Budget John and that's very important. It's the first time that has actually formally been done by a government. We say that if taxes get above, and the technical limit is 23.9 per cent of GDP, the size of the economy. Once you go over that, then you run the risk of damaging the economy, slowing it down. The Labor Party will walk around today and say "oh we've got all this extra money", that they're going to raise from their higher taxes. Well, higher taxes are not good for the economy and they don't seem to understand that. They think they can just keep taxing you and taxing you until you bleed and that's not how you run a strong economy.

LAWS:

Yeah, I understand that. Yesterday Chris Bowen told me that the only reason a surplus is expected in 2019-20 is because of a growing global economy that's boosted our bottom line. He basically said any government could do it, you know, it didn't take a lot of doing. Is that right or wrong?

TREASURER:

Well, this is what the Labor Party always says. They used to say this about Peter Costello too by the way. They used to go "oh, you know, all those good years under the Howard Government, that was just because they got lucky. They had the lucky years and then Labor had all the unlucky years." Well, it seems to be every time people vote Liberal the country's luck seems to improve on the economy. And you know I don't think those two things are unrelated. Under the Labor Budgets that Wayne Swan had, he was forecasting commodity prices for iron ore at about $150 a ton US and winding it out over the forward estimates and then got a big surprise when the commodity prices fall and the revenue fell out of his Budget. That's how they do it. They actually don't understand that a stronger economy doesn't happen by itself. They just think it happens and you can tax it into non-existence, and that's why people don't trust them on this stuff, John.

LAWS:

It seems to me that the Budget has been pretty well accepted, except of course the old dear down the road who can't find anything right with it at all [laugh].

TREASURER:

Yeah.

LAWS:

But the response has been pretty good hasn't it?

TREASURER:

Oh look, I think so. I mean the papers have had their usual fun. I mean John, I couldn't nominate how many Budgets you've covered as a journalist and a broadcaster. But today I'm on the front page of the Daily Telegraph dressed as Angus Young from ACDC, on the front page of The Australian dressed as Marilyn Monroe, now I think both are pretty disturbing images but that's a bit of fun.

LAWS:

[Laugh] you described your last Budget as "cautious", how will you describe this one?

TREASURER:

Cautious and responsible and I think last year's was responsible too. It's just my nature, John. I just think you have to carefully prepare these things. You don't over promise and you always over deliver, because that's where you focus. I mean it's a very practical job being the Treasurer. You've got to make sure things balance up, you've got to keep the spending under control and spending as a share of the economy falls to below the long run average at 24.7 per cent of the economy which is something we've been working hard on. Taxes, you know, stay under the speed limit, the debt's coming down, we're not borrowing to pay for everyday expenses anymore. So, the financial side of the Government's operations I think is very much on track. But at the same time we're delivering 30 per cent more in hospital funding. We're delivering $30 billion over the next ten years up to an annual payment for schools, 50 per cent more on average for each student. And I know you've got a lot of rural and regional listeners, John. One thing we've done in this Budget, is we've changed the family income test for the youth allowance. Now, what that means is, is that families whose kids go down to the city to go to uni, they can now get better access to the youth allowance when they're living away from home. We've increased that by $10,000 to the family income, and for an additional $10,000 for every additional child. So, I think that will really help families in rural and regional areas who want to see their kids have the same opportunities as kids in the city, to be able to go to university, and to get that income support that will help them live away from home. It's hard enough they've got to be away from their family, but to have that additional income support I think will really help them.

LAWS:

Why has it taken this long to do it though? It's been that way for ages.

TREASURER:

Well, you've got to pay for it. And we're in a position to pay for it because we've been building a stronger economy. And this is why the stronger economy is so important, and it can't be dismissed or assumed away as the Labor Party does, and it sounds like Chris Bowen was doing on your program. He just assumes growth. He can't assume growth. It's like a business going, "I'm just going to assume my profits. I'm just going to assume that the customers turn up. I'm going to assume that I'm going to do well." You can't assume any of that. You've got to work for it. You've got to build it. You've got to have the right policy settings, and that's what we're doing. Lower taxes, particularly for small and medium size businesses, we've extended that instant asset write-off, which means you can completely write-off on your tax expenditure of up to $20,000, which has been very successful since we first introduced it a few years ago, and we've extended it for another year. Another thing we're doing John, which I know you'll know about, is the anti-phoenixing laws we're bringing it. Now, a lot of small businesses get badly burnt by other businesses who willingly or otherwise go bust, and then reinvent themselves so they don't have to pay the bills from their last failed business. So, we're going to have some laws that are cracking down on that. And we're cracking down on the black economy and multinationals as we have been for some years now.

LAWS:

How are you going to crack down on the black economy? You can't beat that, can you?

TREASURER:

One, $10,000 is the limit on what you can pay in a cash transaction now. So, you know, if you're a crim or a terrorist or if you're just trying to get around the tax system, or you're trying to get a discount off someone by letting them do the same, well that'll be illegal. It's not ok, it's not clever. I mean sometimes in the black economy, you know, people who are avoiding and evading tax by engaging the cash economy, well they're ripping off other taxpayers…

LAWS:

Course they are…

TREASURER:

…and they're ripping off their neighbours. It's not ok. It's a crime.

LAWS:

Well that's exactly what it is. But I've never known anyone to be jailed for that crime.

TREASURER:

Well, there'll be penalties, and for transactions greater than $10,000, it will be outlawed in the economy. The other thing we'll be doing John is targeting some of those industries where we know there's a lot of underreporting of income, and there'll be increased resources to go after them. But the other thing we'll be doing is that if an employer pays their wages in cash and doesn't report it. Well if they get found out, they won't be able to claim what they've paid on their taxes. You know, so that's a big incentive to do the right thing.

LAWS:

Yes but people shouldn't be paying wages in cash, should they?

TREASURER:

No they shouldn't. They absolutely shouldn't. And I think there's a bit of a culture thing here we've got to change. Remember the video piracy ads you see where you've got people downloading movies and they thought that was ok. Well, it's actually robbing a legitimate industry from jobs…

LAWS:

Yeah of course…

TREASURER:

…and rightful income that they should be earning. Paying cash is ripping off your mates at the end of the day. I think when you hear those stories at the pub, "I'm very clever, I just pay cash and I pay less", what you've done is you've ripped off the mate who's sitting next to you at the pub who's got to pay higher taxes to cover you. You think you're being clever – no, you're being a numpty.

LAWS:

[Laughs] wonderful turn of phrase you have, Scott [laughs]. Treasurer, I appreciate your time very much, and I know you are hard pressed today. You've got other people wanting to talk to you. I realise not important like this is important. You've got to move on unfortunately but as usual I've enjoyed the time I've been able to spend with you.

TREASURER:

Well thanks very much John, and I look forward to you being there next year again and before and we can have that opportunity to chat. I've got to go and introduce a law in the Parliament right now to cut people's taxes.

LAWS:

To cut them? Well, I better let you go.

TREASURER:

Thanks a lot John all the best.

LAWS:

And to you Scott, thank you very much.