16 June 2017
Transcript - #2017120, 2017

Doorstop interview, Sydney

SUBJECTS: Major Bank Levy Bill; gross debt; Finkel Review; Press Gallery Midwinter Ball.

QUESTION:

As was discussed in the conference today, the banking levy is being discussed in a Senate Committee today. Anna Bligh has again talked about a sunset clause. Why is the Government opposed to that?

TREASURER:

This is a structural measure, this is not a temporary measure. I set this out in the Budget. When we return to balance, as we're projected to do in 20-21, the bills don't stop then. That's why the tax doesn't stop then. We need to get back into balance, and stay in balance. And this is a structural change to how we are levying our major banks and taking into account the quite unique position they hold in our banking and financial system. It's not a temporary measure, it was never designed to be one. In the same that, personal income tax is not a temporary measure, it's permanent, as is company tax and so is this levy.

QUESTION:

She's also calling for the Treasury to release the modelling on how you have come to this figure. Why isn't it being released?

TREASURER:

This is why we have Senate Inquiries and Treasury officials are before the committee this afternoon and I am sure they'll respond to questions from the committee which is normal practice. The issue for the banks is there is a levy and they will be paying it and the revenue raised is obviously a matter for the Government. But if the banks want to make some extra contributions, they'll be most welcome.

QUESTION:

Anna Bligh has warned that the cost could be passed on to customers and shareholders as well. Surely that is not what you intended or want?

TREASURER:

The cash rate moves at 25 basis points a time. And we know that in the last 18 months or so, the spread between the cash rate and mortgage rates has moved by about 15 basis points even when there's been no limit. What banks do and how they deal with their customers and how they charge them and the relationship they have is a matter for them. They have an opportunity to defy expectations, to disprove all of the negative perceptions that many Australians have of them and how they respond to this. This is a modest measure, it's a very modest measure when you look at the scale of these banks and particularly the up to 40 basis point advantage they have in the market because of the implicit guarantee that exists from the Australian taxpayer. So to have a levy of six basis points is an entirely reasonable thing for the Government to do and frankly is overdue. And so it will come into effect on 1 July, I'm disappointed that it's been a bit delayed this week by some of the games the Labor Party played in the Parliament this week, but it will be dealt with next week. That will ensure a key element of the Budget is in place as we go into the new financial year.

QUESTION:

So, it will be voted on next week?

TREASURER:

Yes.

QUESTION:

The country's debt is expected to notch half a trillion dollars, you have been critical in the past about debt under Labor, how can you argue the Coalition is any better considering that [inaudible]?

TREASURER:

Net debt was falling to 8.5 per cent over the next 10 years. It will peak at just below 20 per cent. So net debt is coming down under the Government and the rate of growth in debt under this Government has fallen from over one-third to less than 10 per cent. Now, if we maintained the rate of growth in debt that we inherited from the Labor Party, we would have passed that half a trillion point 18 months ago. In this Budget, I would have had to have talked about a gross debt of over a trillion dollars in 2017-18. So, when the Labor Party talks about debt, they should be apologising, that's what the Labor Party should be doing when they talk about debt because they are the authors and initiators, they are the truck drivers of the truckload of debt they created. What we have been doing as a Government is decelerating that, slowing that down, bringing the Budget back into balance, through measures, which include the bank levy, and then keeping the Budget in balance because that's what pays down net debt. Now, the debt that we are raising in gross terms beyond 2018 -19, that's paying for airports, it's paying for railroads, it’s paying for roads. It's paying for submarines, frigates, patrol boats, it's ensuring that we're not drawing down on the future fund. So if the Labor Party says they don't want to do any of those things, they want to cancel the submarine program, or not build Western Sydney Airport, or they want to raid the Future Fund, they should make it clear to the Australian people. Net debt will be coming down under this Government, gross debt will be doing what it's doing to fund the initiatives that I have just talked about.

QUESTION:

Surely the general public would just see debt as debt?

TREASURER:

This is the distinction I made before the Budget. Australians understand that you don't put the grocery bills on the credit card. If you do that for too long, it all ends very, very badly. What the Government is doing is from 2018-19, we will no longer be doing the equivalent of putting the grocery bills on the credit card. What we will be doing is the debt that we raise beyond that year we will be investing in lasting infrastructure and financial strength for the country. When the Labor Party racked up debt, they were spending on overpriced school halls, on insulation programs that set fire to people's roofs. They did cash splashes that sent out cheques to dead people and pets. I mean, the Labor Party racked up hundreds of billions of dollars of debt on wasteful and poorly-designed expenditure. That's how we have got into the situation that we inherited. The accumulated deficits of the Liberal and National Parties in office over a comparable six year period is about $70 to $80 billion less than what it was under the Labor Party. So, we're slowing down the growth in debt, we’re bringing the Budget back into balance and ensuring that where we are using the debt that we have available to us, we're putting it into infrastructure. People like Anthony Albanese have supported that program. They have said themselves, when interest rates are low, the Government should be borrowing to invest in infrastructure. That's what Anthony Albanese has been saying. So, at least there's one person in the Labor Party who seems to agree that that's a prudent approach. They just wanted to borrow money to do cash splashes and send cheques to pets.

QUESTION:

New South Wales residents are in for another power price hike. There are suggestions that adopting the Finkel recommendations could change that trajectory. Do you agree?

TREASURER:

I think Energy Australia customers will be feeling a little disappointed today with the decision the company has made on those prices. This is the reality of the energy situation, as long as there's politics as usual on energy policy, there'll be business as usual on energy policy, which means prices will continue to increase, and they'll be unsustainable, unaffordable. What the Turnbull Government is doing is engaging in trying to change that. Already, the Prime Minister has taken decisive action when it comes to gas to ensure that we can clawback the gas that would go overseas to ensure that it is available here in Australia, to put downward pressure on electricity prices. I have initiated an inquiry with the ACCC to get under the hood when it comes to understanding the retail prices in electricity and the margins that can exist there and some of the issues that may need to be directly addressed in the retail sector. So the ACCC is already on the job as the consumer’s cop on that issue. Now, we're investing in Snowy 2.0 and that is going to create a critical additional storage capacity which will add to the capacity of Australia's energy system. When it comes to the Finkel report, he's outlined, I think, a very compelling case that we cannot afford to go on with a business-as-usual scenario. There must be a change. Now, this week, Bill Shorten couldn't talk about bipartisanship on energy policy without smirking. That's not what the Australian people need. Where we are, is we're on Australian's side, who want to see lower and more affordable power prices. A stable system that has a certainty in the grid for baseload power and that, of course, meets our emissions reduction obligations. That's what our plan is designed to deliver.

QUESTION:

Just finally, do you agree with Christopher Pyne, your colleague, that Labor is responsible for the leak from the ball?

TREASURER:

I have no idea. I think what happened with Malcolm's speech the other night is it demonstrated that he has a great sense of humour and that's what Australians do when they get together. We raised a lot of money for charity the other night. You know, when you’re mates, you can have a bit of a giggle at yourself, with you and your mate, and that's what we do in Australia in friendships. I think this little episode will be seen in that context. It was a joke. That's what it was. And I think it has revealed, one of the things I know about Malcolm is he's got a great sense of humour and I think that was on display and I suppose Australians have got a bit of a window on that. It wasn't intentional but nevertheless they did get a bit of a sneak-peek on that and it proved he is not a bad comedian at having a bit of a crack, particularly at himself, which was the whole point of the joke.

Thanks.