25 June 2017
Transcript - #2017126, 2017

Interview with Michael Pachi, 2GB

Subjects: ‘On their side’ – address to the Liberal Party Federal Council; wages; delivery of Gonski 2.0 - real needs-based schools funding; Major Bank Levy; South Australia bank levy.

MICHAEL PACHI:

Scott Morrison joins us on the line. G’day Scott. How are you?

TREASURER:

Good Michael. Well, the Sharks lost to Manly down at Shark Park so I am a bit blue about that.

PACHI:

I’m not, because I am a Manly supporter so I am really glad that was able to happen.

TREASURER:

They thoroughly deserved the win today. It was not one of our better outings.

PACHI:

On that issue, there you go, we’ve just started our conversation, you are talking about, you are a mad Cronulla supporter, a mad Sharks supporter. You talk about that stuff. You also talk about your family. You’re very fond of, of course, as a father, of your two girls. Is this the sort of stuff that you were trying to tell your colleagues yesterday at the Federal Liberal Party Conference? That they need to be more authentic and allow more of themselves out in the public?

TREASURER:

Yes, I think that is what politicians do endeavour to do. The key point I was trying to make was that at the end of the day it’s not about us trying to convince people to join the Liberal Party side. It is about us as a Liberal Party convincing Australians that we are on their side. That is really what it is all about. It has been, since the Global Financial Crisis, almost decades, and over that period of time wages growth has not been flash over a long period of time and people have been doing it a lot harder than they did before that period. So, there is a lot of frustration out there. That can lead people to want to lose confidence in the whole system. What I was talking about, I wasn’t just talking about Liberal politicians. I was talking about all politicians. I am talking about media journalists too from Canberra. Australians are turning down the sound on all of us. They want to know that we are relevant to them and that we are focussing on the things that they want us to focus on. The main thing, and I think when people understand what your motive is then, as they see other challenges hit them coming forward they will know that you will be there for them. That is very much the message that the Prime Minister and I and the whole team want to get across to our fellow Australians.

PACHI:

What is interesting is, that you were saying yesterday in your speech that it is no longer enough for a Government to rely on an impressive track record and that you were simply going to be better than the other mob. So, that is obviously another issue because you could argue that people always talk about the Keating, Hawke and Howard years and then things seemed to have derailed somewhat from Rudd onwards.

TREASURER:

They were a very ordinary government to put it diplomatically. On top of that I would say this. Times are very different now, economically, than they were a decade ago and before then. I think we need to understand that in the context of what is happening politically. I mentioned in my speech yesterday that ten years ago wages growth had been 7.4 per cent in the National Accounts on that measure then the more recent National Accounts just around 2.5 per cent on the National Accounts measure. There are other measures, wage, price index, and so on which is about 1.9. When people’s wages aren’t growing like they used to, you don’t feel as in control of things as you might have once. You get more reliant on services, in particular essential services, Medicare and things like that. In the Budget what I was trying to say was that as a Government we get that. We understand that things are tight and the services that you rely on are not things that can be dabbled with and are just mainly dispensed with. That they need to be supported and you need to have confidence about that. That is exactly what we did in the Budget and on schools funding. People rely on the funding going into their local schools. This is a government that has done more for the needs based funding of schools than any other.

PACHI:

Are you sensing there is a greater cynicism out there in the public?

TREASURER:

Absolutely. I think there is a lot of thick ice.

PACHI:

Well, how do you cut through that?

TREASURER:

You get through it, and the way you achieve that is by genuinely connecting with people and have them understand what you are about and why you are doing things. You mentioned it before, it isn’t enough just to have a good record or that the other side are a bunch of muppets. That is not what is going to actually ultimately be enough. People need to get you and understand that whatever comes the way of Australia, whatever comes the way of people’s individual circumstances, that we are a government that gets it and will focus on seeing their problems. Not the focussing on ourselves, not focusing on ideology or partisanship or Liberal and Labor or whatever it is. They just want to know, `that is the problem are you guys going to fix it or are you going to give us a philosophy lecture?’. They will not be getting one from me or the Prime Minister.

PACHI:

The Government, there is an argument there that the Budget that you handed down has tried to fix up some of the problems there has been some criticism also that you are spending too much and that also adds to the debt. I know that you are saying that you had to find a pragmatic approach through. That doesn’t seem to be reflected in the polls?

TREASURER:

I think there is a lot of cynicism out there and I don’t expect these things to just turn on a dime. When it comes to expenditure Michael the expenditure growth under this Government is the lowest of any Government in the last 50 years. That is not an argument – that is a fact. It is actually, at 2 per cent, it is the lowest level of growth expenditure of any government in 50 years. So, we have been able to maintain that, maintain the AAA credit rating, increase support for schools, guarantee Medicare and fully fund the National Disability Insurance Scheme and the Budget as projected coming back into balance in 20-21, which is the same year that I had it projected to do when I first became Treasurer two years ago. So, we are sticking to the course and you have to continue to be consistent so people see that over time and they see the real colour of your credentials over time. So, much focus is on fortnight to fortnight. You can’t govern like that. That is how Kevin Rudd governed and we all saw what happened to that government and the Gillard government and that is not what we are doing.

PACHI:

Treasurer, you talk about one of the issues that people are feeling at the moment is wages growth. We do have a low unemployment rate. The last set of unemployment numbers 5.5 per cent but people do feel that their wages aren’t growing, cost of living is still rising. You can understand why people get upset when people hear that politicians are getting a 2 per cent pay rise we’ve had a board full of callers tonight not happy about that decision.

>TREASURER:

Well, we don’t set them. That is the point.

PACHI:

Can I ask you one question, do you appoint or does the government appoint the Tribunal that sets them?

TREASURER:

That is appointed over many years and so you have got people there from either side of politics and they don’t show any fear or favour. I have been in Parliament ten years now and there have been quite a few years where there have been zero increases and at 2 per cent. We could all live in a tent on the front of Parliament House that I suspect that people would say that tent is too nice. And that is why it is done independently. You don’t want politicians setting the pay.

PACHI:

No, you don’t, but you can understand why people get upset though.

TREASURER:

I don’t know what the other system is and if someone has a better idea about how it should be done and how it should be done independently – even more independently – it is currently done 100 per cent set aside from the Government or members of Parliament then by all means I am all ears. That is the system. It has been that way for a long time. We haven’t as a government sought to advantage MPs or parliamentarians. It is completely independent and at 2 per cent that is the wage price index which is at 1.9.

PACHI:

What do you make of this suggestion by the One Nation Senator Malcolm Roberts? He is apparently seeking legal advice so politicians can opt out from the pay increase? Do you think that would be a fair mechanism that if you are a politician and you are given a pay rise but you say I am not going to take that pay rise.

TREASURER:

Well, he can send it back if he wants? He can put the money in an account and send it to The Treasury if he wants. No one is stopping him from doing that.

PACHI:

So, he could do that if he wanted to?

TREASURER:

I think when politicians start playing politics on those sorts of things, you know it is an easy thing for them to do, but if he has got a better idea of how it should be done then he should do it and he should suggest what it is. I am not having a crack at him. If he really wants to put the extra money in an account or give it to charity – like many members do by the way – we all make contributions in our own electorates.

PACHI:

So you can do that? That is a fair point that you are making too. Just a few quick ones. Let’s get on to school funding. A good win for the Government but you do need to find an extra $5 billion – where are those savings coming from?

TREASURER:

That is over the next ten years. It is $1.3 over the next four in the Budget and the Forward Estimates and that will all be accounted for in the mid-year statement that comes out later in the year. As you know that is the process. If there are any changes between the Budget and Mid-Year statement then the numbers are updated and any changes to any areas are dealt with at that time.

PACHI:

You must be glad that you were able to do a deal with the Independents rather than the Greens?

TREASURER:

I am pleased that we have got the arrangement that we have. I am pleased we have got needs-based funding. I am pleased we have got a system which is for once fair and people know whose responsibility it is and Australians I think have a very strong view that our education funding should be shared between the Federal Government and state governments for public schools we will move to a decision where we will fund 20 per cent of that. That is up from 10 years ago. That was in single digits. Going back to the Howard Government we had single digit percentage funding of public schools in this country. We will take it to 20 per cent for public schools. The biggest share of extra money that comes from this is going into public schools – public primary schools, public secondary schools.

PACHI:

And how do you convince the Catholic sector? They still seem to be complaining.

TREASURER:

They’re getting more money under our plan. I think the issue is this. The way the funding for Catholic schools is done is they are block funded. That means that an assessment is made of every school in the state on the school resourcing standard, the needs-based standard, the Gonski standard and then they are given, that is all totalled up and that is all given to the state catholic office. They then decide how much money is given to each and every school.

PACHI:

So, you are suggesting that maybe some of the Catholic schools once they get this pot of money should make sure it is directed at the most needy ones?

TREASURER:

I would think that is what they would do. Now, how they distribute that is a matter for them and how they communicate that to all of those schools is a matter for them. We communicate what assessment is done on each school but they are not bound by that. I am sure they have very good reasons for the decisions that they make but they are not decisions the Government has made therefore it is not for the Government to explain them. We have adopted a very transparent approach and it is for them to communicate to their parents. The bottom line is, they are all, every single state, getting more.

PACHI:

The extra $5 billion – so the fact that it has gone up from $18.6 to $23.5 that extra $5 billion that will be accounted for in the mid-year financial review released around December.

TREASURER:

Correct, but let me just stress this again Michael. The Budget is over four years and that figure is $1.3 billion. So I don’t want people to think it is $5 billion over the next four years – it is not. It is $5 billion over 10. In recent times there have been a lot more talk about figures over ten years. The ones, particularly the ratings agency looks at is what happens over four years and so obviously that’s where we will directly.

PACHI:

I do remember though that you were railing against Labor about having these ten-year objections though.

TREASURER:

I think they’re informative but what actually matters when you form Budgets is the estimates that you put around the four-year period and it is good to have an indication of what the implications of that are over ten years. I don’t discount that. Estimates over ten years can get pretty woolly. Over a shorter period of time, I think they can be a lot more definitive.

PACHI:

Can I ask you just before I let you go, what do you make of this South Australian Government decision to impose a state-based bank levy. They are saying they are doing it because the Federal government is doing it and that is why they can do it.

TREASURER:

I think that is a pretty lazy argument frankly.

PACHI:

So do I.

TREASURER:

We set out the basis of what we were doing and the major banks have over $100 billion of liabilities have a very specific and unique role in our banking and financial system and enjoy between a 20 and 40 basis point advantage over all other banks including foreign banks in the system. They have effectively got an implicit tax payer guarantee. Now, that is not a state guarantee – that is federal. So we have put together a structural levy that reflects that and that is a permanent arrangement and we have legislated by the way and there are no legal issues with that. There are no constitutional issues – nor should they be. Now, what the state government has done I think raises a lot of questions, but that is really between the banks and them. There are constitutional issues, I think, that have been rightly raised but they will be determined I am sure by the banks. They have got their own lawyers, they have plenty of them, and the banks, I am sure, will spare no expense I am sure pursuing that from a legal perspective.

PACHI:

You must be worries though that people like Western Australia are considering similar moves?

TREASURER:

I think it is important that these questions around the constitutionality and how it would be settled. I am sure the banks will take that position and argue that. Similarly there are issues around the GST. When the GST was introduced the commitment was from the states they would get the GST in return from abolishing a whole bunch of taxers and they included some financial institutions and other things called bad taxes. Now, I am not saying they are exactly the same thing, but they had said they would not introduce similar taxes. That is what the agreement said. That is for the banks to argue their case and it is for the state government in South Australia to establish the bona fides if what they have done. But just to say it is some sort of carbon copy cut-and-paste from the Federal Government, I think, is pretty lazy. There are very different circumstances behind both and I don’t think they can just appropriate that and try and lend off our credibility because I don’t think the same circumstances apply to what they are doing there. Effectively what they are saying there is they can tax liabilities raised in another state, here in New South Wales, I am not sure how that stacks up?

PACHI:

Exactly and then here the state government in New South Wales and also I believe in Queensland as well, that is where we are broadcasting as well, 4BC, they have categorically said they don’t really want to go down this sort of path.

TREASURER:

I think it is going to get pretty messy Michael. I think it is going to get pretty messy. Certainly that is not what has happened with ours. There were no questions legally about our ability to do what we did. It was a modest measure of six basis points. It did reflect a genuine structural issue within the banking and financial system that was long overdue to be addressed and we have done that.

PACHI:

Scott Morrison, thank you very much for calling in and sorry about Cronulla’s loss today.

TREASURER:

There is always next week and the week after. Good luck… well I can’t say good luck Manly – a Shark supported never, never would say that.

PACHI:

No, silver tails.

TREASURER:

Anyway mate, good to talk to you.

PACHI:

Good to talk to you. Good on you. That is Treasurer Scott Morrison there.