20 June 2017
Transcript - #2017121, 2017

Interview with RN Breakfast

SUBJECTS: Schools funding; Bank Levy; Governor Lowe; Finkel Review.

FRAN KELLY:

The Treasurer Scott Morrison joins us in our Parliament House studio. Treasurer, welcome back to breakfast.

TREASURER:

Good to be here Fran.

KELLY:

The Gonski legislation won’t pass in its current form so how much extra money are you prepared to offer? Is it another $5 billion over the decade?

TREASURER:

Well, Fran, I don’t think I would be as presumptuous to make that assumption that you are making. The Minister is working through these issues with the crossbench…

KELLY:

But you are not going to get it through on $18.6 billion – that is clear.

TREASURER:

Fran, you must have some crystal ball that others don’t have to be able to be so definitive about these things. We are working these things through. That is the nature of this process as you know, in this Parliament and we will continue to be constructive and pragmatic in those negotiations. There is something very important at stake here. What is at stake here is an increased investment in Australian students in schools all around the country and a fairness model which means that needs based funding becomes a reality in this country and we don’t have all these special deals that used to exist and there is a clear policy standard for funding schools in this country. That is what we are fighting for here. We are fighting to get this new and better system, the Gonski system actually in place and to remove all of those special deals and all of those sweetheart deals that used to be there. That puts every student in a much better place.

KELLY:

As John Howard says it always comes down to the arithmetic and the Greens are under extreme pressure from the Teacher’s Union not to pass the Bill and there is no certainty you will get the numbers on the crossbench either. So, could we see this legislation withdrawn this week to allow more consultation?

TREASURER:

I think we will continue to work the issue. Students have got to come before unions, Fran. Students have got to come before everything when it comes to this debate and this issue. We are very focussed on getting that needs based fair system in place to give certainty on schools funding to end the funding wars and ensure that over the next decade we have a very stable platform to give our schools the certainty they need to get on with their most important job and that is educating our children.

KELLY:

Are you telling that message to your Party Room? Because the concerns about the impact on the Catholic system persist within the Coalition. Yet another of your colleagues speaking out now. Eric Abetz says he hopes the Government, quote, “hasn’t done a dirty deal with the Greens because that would be absolutely horrific. I am very concerned about the Catholic sector.”

TREASURER:

There is $1.2 billion in extra funding for the Catholic system over the next four years and there is $3.4 billion over the next ten years. Every part of the system is getting more funding under this model. Every single part of the system. And better than that…

KELLY:

So why don’t your own colleagues understand?

TREASURER:

Again Fran you make assumptions about where discussions are going to end. Discussions can start in many places but it is where they end that matters. We have got some very difficult issues through. In last year’s Budget we made the changes to superannuation and we legislated them. Last night we legislated the bank tax. And the day before we were able to legislate the changes to GST on low value goods. Last night we got through the second reading on the Medicare Guarantee Fund which will be dealt with this morning and that will pass also this week. The Diverted Profits Tax that was in last year’s Budget – that comes into effect on 1 July of this year for multinationals to ensure they pay their fair share of tax.

KELLY:

But Treasurer I am not making assumptions. I am just reflecting on the public comments made by your own colleagues; Kevin Andrews says don’t do a deal with the Greens and look after the Catholic sector. Senator Chris Back says he will cross the floor rather than see these cuts to the funding to the Catholic sector. We have Eric Abetz…

TREASURER:

But there are no cuts to funding to catholic schools.

KELLY:

I am just reflecting the comments of your colleagues. I am not saying one way or another. I am saying it is your own colleagues who seem determined to delay this.

TREASURER:

We are in those discussions and that legislation is in the Parliament. It has already passed the House of Representatives and we are committed to ensuring that we have a needs based system of school funding in this country. It increases the investment in our children’s education by $18.6 billion over the next ten years which includes a significant investment in the Catholic system as it does in the public schools system and the independent schools. This is a system that will deliver the fairness and the certainty that has been lacking.

KELLY:

So, to help your own colleagues and others understand this. The Government keeps saying there is more money for the Catholic system. Your colleagues are coming out and the Catholic education system coming out with modelling that shows there will be $4.6 billion less in growth funding for the Catholic system. Will you show the modelling that you are working on to persuade your colleagues?

TREASURER:

The numbers are there for all to see.

KELLY:

Will you show them the modelling?

TREASURER:

It is $3.4 billion extra over the next ten years and $1.2 billion over the next four years. They are just the straight numbers. That is what they are Fran. There is an increase in funding. The other thing that we will completely respect is it is up to the Catholic system to decide how they distribute the funds within their schools. That is a matter for them. Part of the issue is that we will put on the estimator what the needs based assessed funding is for a particular school. Whether that is what is actually provided for that school is a matter for the Catholic education system itself. We have got no plans to interfere with how they might then make decisions about how they allocate funding within their own system. That is a matter for them.

KELLY:

So you are confident this will get through this week?

TREASURER:

I am confident that we will see these changes take place Fran because they are the right changes, they are the fair changes and they put to an end the bickering over school funding that has plagued this Parliament for a very, very long time. Whether it is on this issue or it is on fully funding the National Disability Insurance Scheme or dealing with the very difficult issue of energy. There is a need for this Parliament to come together in the middle, to get on Australians’ side and Australians want these issues sorted and the Government is working with the Australian people to ensure that they are. 

KELLY:

Let’s go to some of those other issues now. The Bank Levy, as you mentioned, sailed through the Senate last night but not before a Government dominated Economics Committee handed down a report into this measure. It says this Bank Levy, this tax, should be reviewed in two years’ time to make sure that it is working as intended and also it should be waived if a bank is suffering financial duress. Will you agree to those recommendations?

TREASURER:

No, there’s no need to do any of those things. The bank levy has been legislated as I said it would be and it comes into effect on 1 July. The other thing that comes into effect on 1 July is the diverted profits tax so the organisations that will be paying more tax from 1 July are large banks and multinationals as a result of the policies of the Turnbull Government. Banks will be paying more tax…

KELLY:

And you won’t be getting much argument from many people about that but I’m just pointing out that your own Coalition MPs who are on this Economics Committee chaired by Liberal Senator Jane Hume say that there is a case for reviewing it in two years “given the rushed nature of its introduction to examine the efficacy of the levy, the effect on competition and the need for the levy to continue in perpetuity”. Good idea?

TREASURER:

The Senate’s a master of its own fate in terms of what inquiries it chooses to take at any point in time. But that’s not Government policy, hasn’t been Government policy and isn’t Government policy.

KELLY:

Let’s go to the economy more broadly. The Reserve Bank Governor, Philip Lowe, made a pretty extraordinary call yesterday, I thought, basically calling on workers to stand up and demand pay rises. He says the economy is suffering a crisis, that’s his word, in wages growth – record low of 1.9 per cent annually and workers should use the job security that comes with relatively low unemployment to push for more money. Is he right? Is it time for employee to start arcing up for their…

TREASURER:

Well, he said many things yesterday, Fran. He also said…

KELLY:

I’ll come to some other things…

TREASURER:

He said the economy was improving and the expected growth to be stronger in the future…

KELLY:

Indeed, he did. The animal spirits are returning to the economy.

TREASURER:

And just as I said in the Budget that better days are ahead and the Reserve Bank Governor, I think, is exactly on the same page as the Government when it comes to these issues. I’ve also said that I’ve been concerned about the slow rate of wages growth. Now, wages growth in any enterprise will come from a company that’s growing and that’s why we want to ensure companies do grow. That’s why our Enterprise Tax Plan, our infrastructure Plans, our Defence Industry Plans, our trade plans – all of these things which we’re implementing, they’re all about seeing companies grow and when companies grow…

KELLY:

And what the stats show is that companies are growing but the wages aren’t growing. Do you agree with the Governor that it’s time and a good idea for workers to start demanding wage increases?

TREASURER:

Well, wage increases should follow the profits that companies are making…

KELLY:

So we’ve got the company profits up. Is it now time…

TREASURER:

There’s been two quarters, Fran, and prior to that we had ten negative quarters on average which – let me rephrase that – we had on average on the ten quarters prior to that profits growth of -0.2 per cent. At the same time, there was wages growth of 0.7 on average over those ten quarters. So, we’ve had two quarters where profits have improved that was predominantly due to the movement in commodity prices and was fairly confined to particular sectors of the economy, although there was some better performance in profits across the board. But my point is this, Fran, and this is where I agree with the Governor that where companies are doing better, where companies are actually earning better profits, then that is the way that wages can lift. You don’t just drive wages up to drive profits down. What you do is ensure that the enterprise is successful because no one gets a pay rise in a business that’s going backwards and no one gets a job in a business that’s closed.

KELLY:

Let’s go to another comment from the Reserve Bank Governor yesterday, Philip Lowe said, as we mentioned, the animal spirits are returning to the economy but political deadlock in Canberra is an ongoing threat to living standards. And he said too many good ideas are not being implemented because they can’t successfully navigate the political process. Is the impasse in the Coalition party room over energy policy and the Finkel Review proof of this?

TREASURER:

Well, no, the impasses that we’ve had in the Parliament are proof of this, Fran. That’s where the impasse has been…

KELLY:

Well, that includes over the Finkel Review at the moment, isn’t it?

TREASURER:

What we’ve got is we’ve got a Labor Party led by Bill Shorten which is smirking at bipartisanship. I mean, he literally smirked when he asked a question about bipartisanship on energy policy last week in the Parliament. What we need is for the Labor Party to climb down from their ideological position on energy and actually meet the Government where we’re seeking to meet – which is on this side of the Australians, by the way. Australians want to see affordable, more reliable energy including base load dispatchable power. That is what is needed to ensure that we put downward pressure on electricity prices in this country. Now, we’re taking the steps to do that, Fran. We’ve moved on the gas issue. The gas issue and getting access for domestic use for our gas reserves, our gas resources, is critical to getting the pressure down on those prices and the Prime Minister has acted. We’ve acted on the ACCC inquiry to give consumers a fair deal to ensure that how retail energy prices are being set is fair and we’re checking that out as we speak. We’re acting on better regulation whether it’s through the COAG process to make sure it’s more transparent and more efficient…

KELLY:

And we’re arguing over the Finkel Review.

TREASURER:

Well, there’s one recommendation in the Finkel Review that lowers…

KELLY:

The major one?

TREASURER:

Yes, it is. There’s about 49 others, Fran, there’s 49 others. And I think the Finkel Review has been – which we commissioned, by the way, with COAG – to ensure we were having this very discussion. Whether it’s Snowy 2.0, investing in new generation technologies and investing in low emissions technologies through the Clean Energy Fund, these are all the things that we’re doing to get energy prices down. We will do what is necessary – whatever it takes, Fran – to put energy prices down and make them more stable and reliable in this country. But we won’t be doing that on the basis of an ideological view. We won’t be constrained by any one type of resource, which the Labor Party clearly seems limited in thinking on.

KELLY:

Treasurer, thank you very much for joining us.

TREASURER:

Thanks a lot, Fran. Good to be with you.