18 August 2016
Transcript - #2016107, 2016

Interview with Leon Byner, 5AA

SUBJECTS: $6.5 billion in Government savings measures taken to election by Labor; enterprise tax plan; Arrium; energy policy; GST; Moody's affirms Australia's triple-A credit rating; health policy; making superannuation more sustainable

LEON BYNER:

Thank you for coming in today. Why are you here?

TREASURER:

Well, I am meeting with some colleagues today. We have got a big legislative program coming into the Parliament. I am here consulting with my colleagues as we prepare that legislation. There are many aspects to that. I mean one the Prime Minister referred to yesterday, and I have been talking about now for a few weeks, is that we will be putting to the Parliament the savings and other Budget measures that the Labor party adopted in what they put to the Australian people in their estimates, what they put in their economic documents before the election, adopted some $6.5 billion worth of savings and other measures that we had in our Budget. Now, we have a simple proposition that Bill Shorten shook hands with the Australian people. That is the negotiation he did on that $6.5 billion. He gave them that commitment that he was going to support $6.5 billion. So, we think he should honour that commitment and that negotiation he had directly with them at the election.

BYNER:

So, that brings me to the question. How much of your company tax cuts do you think you are going to get through?

TREASURER:

Well, that is a matter for the Senate. I am putting the whole lot to the Parliament.

BYNER:

Alright. The Nick Xenophon Team…

TREASURER:

And we should, because we took it to an election we think this is important to drive investment, private investment in this country which supports jobs, not just future jobs but the jobs people have today.

BYNER:

Well, I mentioned the Xenophon Team because they are only prepared to offer support on company tax relief to businesses with a turnover of up to $10 million which is very different to what you are looking at. Again, you acknowledge there is probably going to have to be some compromise on much of this.

TREASURER:

Well, I will put the legislation to the Parliament. I have already had a discussion last time I was down here I had a long chat with Nick and his team and when I was down here I met with Rowan Ramsay as well to talk about Arrium, but we will put that to the Parliament and the Parliament will make the decision.

BYNER:

I just have one point that I think you need to reassure the South Australian and other people listening today. That is that Labor during the election made much of the fact that you are giving the big end of town tax cuts when clearly in this transitional situation we are in where we have got a lot of unemployment and a lot of underemployment the priorities ought to be elsewhere. So, how do you justify that?

TREASURER:

Because we need investment in this country because it is investment that creates jobs. It is investment that supports the jobs people have today. So, whether it is investment being made by companies of up to $10 million or companies who have turnovers of $25 million or $50 million, they are the companies who would receive the reduction in the company tax rate in this first term, in this first term of Parliament we are in now. The projection of the enterprise tax plan extends that right across the economy because we need to drive private investment. If companies don't invest Leon, then people don't have jobs.

BYNER:

Well, the problem for Adelaide now and we are doing a segment later this morning but being the Federal Treasurer I think your take on this is pretty relevant to the discussion. You have got companies like Arrium who don't want loans, they want grants but one of their biggest expenses is electricity which is a huge problem for us in South Australia – huge problem.

TREASURER:

I couldn't agree more, particularly on the energy price. On the issue of grants and loans though I would have to disagree with you because we have just extended an [inaudible] loan for a very important part of their business which upgrades the quality of the iron ore that they can export.

BYNER:

What I said was a quote directly from Mark Mentha.

TREASURER:

Well, that may be the administrator's view but in terms of what is best for Arrium, what they need is the sort of practical, tangible support that enables them to make their business more profitable and more attractive to potential investors. Now, we are working through those issues. As you know, Greg Hunt was in Adelaide, down in Whyalla yesterday and he was looking at a range of proposals down there but splashing cash on this doesn't work. The Government has done that in both persuasions in the past. Thrown money here, there and everywhere and guess what the companies leave anyway. What we need to do and what we are very focused on doing is ensuring that every form of support we put into this business is going to ensure its long term viability and jobs. But the other point you raise is frankly even more important than that and that is the biggest challenge out there in Whyalla is the soaring cost of electricity.

BYNER:

And here – and here.

TREASURER:

In fact right across the state. Now, the worst thing you could do on that front is to whack on a carbon tax and I understand that is getting very popular again. It is certainly popular with Bill Shorten and now it is getting popular with Nick Xenophon.

BYNER:

So, again, which brings me to the next point. Ok, carbon tax – no go as far as you are concerned and indeed you won on an election on that to reduce it.

TREASURER:

And got rid of it.

BYNER:

Yeah, ok, but what are we going to do about these absurdly high power prices when we know the market doesn't work?

TREASURER:

Well, there are obviously the issues of base load and the issue of renewables which have more of an intermittent capacity then the more traditional sources and that, as my advice is, is one of the reasons why the South Australian system is struggling to the extent that it is. The interconnector is something that the Treasurer here is perusing. There is a meeting of Energy Ministers tomorrow which Josh Frydenberg will be convening and chairing…

BYNER:

As Treasurer, knowing the costs…

TREASURER:

…that meeting, I was going to say, Leon, is about trying to get the right reforms across the national energy market which includes here in South Australia.

BYNER:

Can it be done quickly though?

TREASURER: Well, it will be done as quickly as it can be. I mean these are not easy issues to resolve but they are very important and that is why Josh has this meeting on tomorrow and I hope he makes a lot of progress because the cost of energy, the cost of electricity, is one of the key inputs to every single business in the country. It has to be efficient, it has to be affordable and those prices have to be sustainable.

BYNER:

I want to talk about the GST. Now, have you made any, I mean WA, for example, have said we want more and there has been a lot of discussion about that. In terms of this state, we already get about, what, $1.28 per GST dollar collected. Is that going to change?

TREASURER:

Well, that is determined by the formula and all the Prime Minister has said and all I have said is over the next few years, the formula will see a rebalancing of the shares of the GST.

BYNER:

The current formula or the one you are going to…?

TREASURER:

No, the current formula will see a rebalancing.

BYNER:

What does that mean for us though?

TREASURER:

Well, the Grants Commission are the ones who run that formula so over time just in the same way that some people's proportions go down and others go up, over time by the formula that gets rebalanced. Now, Western Australia is down to 30 per cent of the GST their people pay, they get to keep. Now, that is not an outcome that when those who put this formula together I think ever conceived as being an outcome that was fair and reasonable…

BYNER:

Ok, but the…

TREASURER:

And let me make this point Leon because some have misinterpreted this in the eastern states. They think I am saying that the Western Australians never foresaw the fact that the share of the GST would go down to 30 per cent. No, that is not what I am saying. What I am saying is when this formula was constructed the idea that one state, any state, whether it is Western Australia, South Australia, Tasmania, New South Wales, Queensland, whoever that they would actually fall to 30 per cent is an absurd outcome. So, all the Prime Minister and I have said is once the system rebalances, once more normal shares have I think been re-established, we need to look at this issue of what is a reasonable floor under which no state should ever fall. That is the simple point we are making.

BYNER:

The point is though, if one state gets more another state has got to get less.

TREASURER:

Well, the formula redistributes across the entire federation.

BYNER:

Ok, so we are about $1.28, do you see that changing?

TREASURER:

Well, that is determined by the Grants Commission not the Government and what I am saying is that formula is owned by all the states and territories. All the states and territories and the Commonwealth.

BYNER:

So, what would change $1.28? What would change it?

TREASURER:

Well, I am not going to forecast that because the formula itself will dictate that outcome. I don't want anyone to get the impression Leon that that is somehow a direction or the decision of the Federal Government.

BYNER:

Should the current Premier assume that the $1.28 we are getting at the moment from the GST may well change in the future?

TREASURER:

Well, the Premier would already know what the projections are on GST shares based on…

BYNER:

Well, if he knows and you know can you tell us?

TREASURER:

…based on the formula. That is where it will go into the future, Leon. But that will be a function of how it works. All we are saying Leon, is, I don't know if you think this is fair or not I assume you would think it would be unfair that any state would be in the situation Western Australia is in today. Thirty per cent of what their people pay on GST they get to keep. We are simply saying that that is an outcome that those who put this formula together would never have foreseen. So, once the system balances of its own accord, so no one is better off or worse off based on the current formula of that going through its normal process, when we get back into that situation then it is timely then to consider and look at putting a floor in that ensures that no state would be put in such a disadvantaged position.

BYNER:

So, you can't tell us at the moment?

TREASURER:

I have answered the question, Leon.

BYNER:

Well, in a simple way for people to understand because at the moment I know the Premier and the Treasurer – and they are not the only ones who are concerned about what we are going to get out of the GS...

TREASURER:

Well, every state is concerned about what they will get out of the GST and the answer to that question is we are not changing the formula over the next couple of years and they will continue to get what their projections are.

BYNER:

Alright. Now, Moody's have given us a triple-A. Yes, you have got it. What does that mean for Phil of Freeling or Doug of Dulwich?

TREASURER:

Well, what it means is that our banks, the Commonwealth, the state government can continue to borrow at more affordable rates and even more importantly, in this very uncertain economic time, that if there were an external shock in our economy, if things really, really got tough then Australia is further up the queue. In fact we are at the top of the queue when it comes to being able to access money at the cheapest rates. So having a triple-A credit rating is an important part of our national financial resilience. It is like an insurance. Our credit rating means you are able to get the money when you really, really need it at the best possible rates.

BYNER:

At the moment in SA we are having a very healthy debate about health. We have health costs overruns with the world's most expensive hospital which we still haven't got the keys to yet. Do you foresee greater accountability by the states for how money given to them by the feds is actually spent?

TREASURER:

Look, I couldn't agree more and it was a subject that was discussed at the last COAG meeting with treasurers and the Prime Minister and myself and all of our counterparts. It isn't just the Commonwealth. The Commonwealth will get endless reports from bureaucracies with paper shuffling backwards and forwards between Adelaide and Canberra or Brisbane and Canberra or wherever. The people who really need to know are the people who live in these states and territories and we need to know how projects are proceeding, particularly for important funding that is going into our hospitals. For example Leon, on education. The Commonwealth including the transfer payments made to the states accounts for more the half of all public school funding in the country. So this idea that the Commonwealth doesn't support public education is an absolute nonsense and we want to make sure those schools work effectively for students, we want to make sure the hospitals work efficiently. Because if the costs keep going up the way they are and revenues aren't matching that, unless people want to have tax rates that are higher than anywhere else in the world then we are going to see services deteriorate. So, you can do one of two things, it is like a business, you either put up your prices or you get control of your costs and we need to get control of costs in health.

BYNER:

Well, we certainly need to get control of the cost in utilities as well and every state has got this. We have a very unfortunate spike. As Federal Treasurer, can you do anything?

TREASURER:

Well, I think the key issue is tomorrow's meeting with Josh Frydenberg, who is the Energy Minister and also the Environment Minister and working towards constructive changes in the national energy market which can get these things under a better direction. I think every state and territory has an interest in that. There are infrastructure issues associated with that, there are pricing issues associated with that and the monitoring of those prices, there are distribution issues, all of these things are relevant and you need good market based solutions that are going to get the best price, the best access and the best availability because that is not even what householders need, it is what the businesses need because it is such an enormous component of their costs and the less they are paying on that the more they can invest in their business.

BYNER:

Just a quick point about your legislation for savings that you want to put through and get it through the Senate. Labor is arguing that you should have sat down with them and negotiated this rather than the Prime Minister announce it during a speech in Melbourne yesterday. What do you say to that?

TREASURER:

They already agreed to it, Leon. Bill Shorten is saying that he could, he agreed to all of these savings before the election by putting him in his estimates. Now, he didn't negotiate that with me, he negotiated it with the Australian people. He shook on $6.5 billion worth of savings with the Australian people before the last election when he put those numbers in his estimates. So, he is honour bound to do that otherwise he has welched on the Australian people.

BYNER:

Ok, just one other question about this savings issue and that is that superannuation has been very controversial with your backbench. Are you considering any changes or do you want to put that through as was originally planned?

TREASURER:

Well, we are consulting heavily and that is one of the reasons I am here in town today. But let's remember what the purpose is here. We have an ageing population and we have in this country for example over 6,000 people who have superannuation balances of more than $5 million and the earnings on those balances are completely tax free. Now, we have got fewer people in the working age population and more people in the retired population and the working age population, going to work every day, unless we can get some balance in this are going to have to pay higher and higher taxes so people at the other end can pay less taxes. Now, I know they have paid taxes all their lives but this system currently is not sustainable the way it is and it is funded by an income stream that was there in 2007 that is not there today.

BYNER:

Scott, thanks for joining us this morning. What is your next meeting?

TREASURER:

I am meeting with colleagues.

BYNER:

Ok, and again you're talking about super today?

TREASURER:

Not just that but we will be talking about the Budget challenges we have and the Bills that are coming before the Parliament but it is a good opportunity before we go back to Parliament, I mean Nicolle Flint she is a new member here, and she has just been at the get together in Canberra as she prepares and I am looking forward to catching up with her today as well. All of our new members are rearing to go and I think she is going to do a great job and I am looking forward to her contribution.

BYNER:

Thanks for coming in.

TREASURER:

Thanks Leon.