11 May 2017
Transcript - #2017096, 2017

Interview with David Speers, Sky News

SUBJECTS: Budget 2017

DAVID SPEERS:

The Federal Treasurer here with me now. Thank you for your time.

TREASURER:

Hello.

SPEERS:

So, last year, it was $50 billion. You moved forward a year so there’s an extra year.

TREASURER:

An extra year.

SPEERS:

Why’s that $50 billion more?

TREASURER:

At the end of the year, you’ve got all companies included at the start of the program. There’s obviously – as you know – it tiers up as you go over the extra years. So, by adding a full year on the full program, you’re adding that tax cut to the entire business tax paying base.

SPEERS:

And as you point out, under the first ten year plan, there was a slight ramp up where there was only small business and at the end of the full, all big businesses as well. Now, you shift forward a year, you’re catching another full year…

TREASURER:

That’s right. So, the bill I introduced this morning which extended – it was the second tranche – the cost to the current budget and forward estimates for that is to $600 million, and that was set out in the explanatory memorandum for the bill I introduced this morning. So, for the actual budget, the additional cost of what I set out in the bill this morning is $600 million. We updated the ten year cost of the entire Enterprise Tax Plan and the other issue that has been raised was, “Why wasn’t this in the Budget?” Well, it was in last year’s Budget. The Enterprise Tax Plan was not a measure in this year’s Budget…

SPEERS:

The ten year figure wasn’t in last year’s Budget and it’s not in this year’s Budget either.

TREASURER:

I can show you, David. This is the measures section of the Budget and in not one area of those will you find any ten year costings – and you never have. Ever.

SPEERS:

I appreciate that but you caused some headaches for the Government last year having to finally spit out that $50 billion…

TREASURER:

That’s why we’re upfront today. You want an updated cost over the next ten years, it’s $65 billion.

SPEERS:

$65 billion as you know is a very big number, a very big number.

TREASURER:

And $29.8 billion of it is already legislated. It’s already legislated. So, Bill Shorten, if he wants to claim that he has all of this money now, that’s not true for two reasons. One, he would actually have to increase taxes on small and medium sized businesses to do that – that have already had a legislated tax reduction now. And two, he’d have to stop spending it on the things that he said he was going to spend it on before, as the Prime Minister said. He’s already spent all of it. It’s all gone.

SPEERS:

It’s $28 billion of the $65 billion that’s been legislated. That leaves $37 billion.

TREASURER:

$29.8 billion has been legislated and $35.6 billion has not. But he’s already spent all of that. That was all factored in to what they did at the last election, including maintaining the deficit levy out ten years. So, he’s blown the lot and he still had a $16.5 billion…

SPEERS:

[inaudible] $35 billion?

TREASURER:

Because it’s the full ten year projection. It goes into the medium term. So when he allocated the full amount of reversing the company tax cuts at the last election, that continues on beyond the medium term. When he fully allocated an expenditure, what he was going to get from extending the deficit levy, he already spent all of that and they still had a deficit of $16.5 billion higher.

SPEERS:

Ok, but if you’re going to apply ten years from July this year, you’ve got to apply ten years from July this year to all his other policies: negative gearing, capital gains tax reform…

TREASURER:

But that’s all included, David. You don’t get to spend it twice. He’s already spent all of that money. He would have to cut his education policies. Their spending keeps going up too, David, so what they said they want to do on hospitals and schools and things like that – that’s what all of that covers. So, unless Bill Shorten, tonight, decides to cut that spending that he said this measure was paying for before or indeed raised taxes for small and medium sized businesses or raise taxes again in a few years’ time – well, he doesn’t have the money.

SPEERS:

Well, he wouldn’t have to spend as much on some areas, like unfreezing the GP rebate – because you’re doing it. He wouldn’t have to spend as much on Gonski because you’re doing some of that. He wouldn’t have to spend as much on a number of areas.

TREASURER:

No, he would, David, because they’re already $16.5 billion worse off…

SPEERS:

Over four years. I’m talking over ten years, Treasurer.

TREASURER:

That’s $16.5 billion over four, so $16.5 billion when you take it over ten, David. That’s way more.

SPEERS:

The Treasury costing of Labor’s figures over ten years actually put them in front of you.

TREASURER:

That is assuming that they don’t have a tax-to-GDP cap and that’s why I raised that other issue today…

SPEERS:

That’s a fair point.

TREASURER:

So, they’re saying they will allow taxes as a share of the economy to grow way higher than we would and if they say that, they have to then tell the taxpayers what that will do to economic growth. We keep our medium term surplus under the tax cap for that entire period. So, he needs to say will they stick to the 23.9 per cent tax-to-GDP cap? Will he increase taxes on small businesses? Will he – if he’s elected at the next election – the deficit levy comes off in just a few months’ time, will he actually put personal income tax…

SPEERS:

So, if you just stick to that 23.9 per cent cap – it’s your cap, not Labor’s, but your cap – you’d have to cut personal income tax?

TREASURER:

We would love to cut personal income tax.

SPEERS:

You’ll do it before the election?

TREASURER:

Our preference is always to reduce taxes, but what he can’t get away with tonight, David, is this. I can see where he was going with this today. He says, “Extend the deficit levy and we’ll reverse the company tax cuts, and that’s the way we can pay for the NDIS.” That is another lie. It doesn’t add up because he’s already spent the money from the deficit levy and the company tax cuts, it’s already been spent and in order to even just get it for what he’s already committed to on education, he would have to increase taxes for small and medium sized businesses. So, he does not have that money that we talked about today to spend tonight. He doesn’t have it and if he tries to do it, he’s telling a lie and putting a cruel hoax on the Australian people – particularly, if he tries to pretend to people with disabilities that this will pay for it. That is a bold-faced lie.

SPEERS:

But coming back to the figure itself – $65 billion. Are you comfortable saying to Australians, working families that you’re still going to be giving businesses $65 billion? It is going to keep climbing to $725 billion…

TREASURER:

That’s gross debt. Net debt actually comes down and net debt is what actually puts the burden on the budget – not gross debt. Net debt, it was $96 billion that Peter Costello and John Howard paid off. That was the net debt.

SPEERS:

So, what is net debt going to peak at?

TREASURER:

The net debt peaks at 19.5 per cent of GDP in 2018 and then it falls down over the ten years.

SPEERS:

What is the net debt dollar figure?

TREASURER:

The net debt figure peaks at $375.1 billion and then it falls…

SPEERS:

So, our net debt peaking at more than $300 billion and, yet, you’re still giving big businesses $65 billion. Are you comfortable saying to families you’ll do that while also asking them to pay more in the Medicare levy?

TREASURER:

David, you’re assuming that a 30 per cent tax rate ten years from now is going to mean Australia is competitive. Now, if you keep that tax rate at that level for the next ten years – and that’s where it is – people won’t have jobs. So, this is a policy that is designed to grow the economy and draw the investment. Now, if you think 30 per cent – I mean, there are only four countries in the OECD with tax rates higher than us now and that number has been shrinking and shrinking year by year. Where do you think it will be in ten years’ time? Macron has been elected, he’s President-elect. He’s taking it to 25 per cent. The Socialists, previously, were taking it to 28 per cent…

SPEERS:

I appreciate that that’s your argument, that we need a competitive tax rate, but what about the big banks? Whether you get this through or not, they’re going to get the bank levy that you announced this week.

TREASURER:

They will get that and what I introduced this morning was to see the overall corporate tax rate fall to 25 per cent which they would get.

SPEERS:

Ok, but just getting to the banks. As you know, they’ve had their executives in meetings with Treasury officials today. They’ve come out saying there were more questions than answers.

TREASURER:

You know what their question was? “We would like to pay less tax. Can you shrink the base for us?”

SPEERS:

One of their other questions was, “Does this tax apply to transactions between the RBA and the big banks?”

TREASURER:

And those details have been confirmed…

SPEERS:

Surprising that you couldn’t answer that…

TREASURER:

I’m not going to go into a repeat of the internals of that discussion, other than to say, one of the big asks they turned up with today is, “Could we pay less tax?”

SPEERS:

Ok, but they’re saying…

TREASURER:

And that’s not a surprising question.

SPEERS:

The impression they got was you’ve set this $6.2 billion figure you want to collect but you haven’t really worked out how you’re going to collect it.

TREASURER:

No, look, the officials have and they’re working that through. It’s not surprising that they would raise issues and some of the issues they want raised is, “Could we please pay less?”

SPEERS:

Well, it may well be – let me ask you again though, why have you chosen the banks to tax? And not companies that are, in fact, more profitable? Like Telstra, for example, or the Crown Casino?

TREASURER:

David, around the world – whether it’s the United Kingdom or other places – there are levies and taxes that are struck on banks which separate them out from the rest of the economy. And there’s an important reason for that, our large banks for example – and S&P have said this – they have about a 20 basis point advantage in the system effectively because of where they sit in the Australian financial system and an effective implicit guarantee that they get from taxpayers. Now, Telstra doesn’t get that. Mining companies don’t get that. Woolies and Coles don’t get that and certainly, the small business down the road doesn’t get that. And I can also assure you that the ME Bank and IMB Bank and Bendigo Bank and the Bank of Queensland – they don’t get that. So, they do hold a privileged position in our economy…

SPEERS:

But that’s been the case since the Global Financial Crisis.

TREASURER:

Yes, and the first attempt to try and deal with this – and what the previous Government did – was put a bank deposits tax on. So, they went and taxed all the banks, not just the big ones, they taxed all the banks and they put a tax on pensioners’ bank accounts. Now, we’re not doing that. We’re doing the opposite. We’ve aligned this tax, I think, much better. We’ve constructed it in a way that even excludes the capital that we require those banks to hold that’s unquestionably strong. So, I want unquestionably strong banks and I want unquestionably fair banks and I want an unquestionably competitive banking system.

SPEERS:

Finally, with Bill Shorten’s Budget reply tonight, we know he’s going to back the bank levy, but if he says, he won’t back the Medicare levy increase – particularly for lower income families – but he will keep the deficit levy on high income earners, he won’t do the company tax cut. Are you worried at all that this will appeal to some of those working families?

TREASURER:

I think Australians have big hearts and I think they understand the need for this. This is almost a $56 billion hole in the funding of the NDIS. He can’t fill it by extending the deficit levy. He can’t fill it by reversing the company tax cuts – that’s a lie. So, the hole remains and it needs to be filled and it falls to all of us to do that for the reasons that I set out yesterday. Now, I’ll be very disappointed if they don’t support it. I mean, Bill was there when this was set up. He’s a former Parliamentary Secretary for Disabilities. He made statements at the time that the original half a per cent levy was put on calling it a very important social program and that this was necessary. So, he needs to live up to this. I’d be disappointed if he didn’t. I mean, I really don’t want to have a political fight about the funding of the NDIS. There’s plenty of other things we can disagree on – please, can we please agree and meet in the middle? We wanted to do this through savings. They said no. Well, they’re going to say no there and we agreed to do then exactly what they did when they set this thing up and we supported them. This is fair. This is reasonable. And the more you earn, the more you pay. So, someone on average wages paying a little more than just over a dollar a day, but someone who’s earning $225,000, $230,000 – they’re paying a lot more than that. They’re paying over $1,500 a year extra for these sorts of things and I don’t think Australians really in their hearts think that is an unfair thing to do to help their mates.

SPEERS:

Treasurer Scott Morrison, I appreciate your time this afternoon and explaining that to us.

TREASURER:

No worries, David, good to be with you.