28 September 2016
Transcript - #2016140, 2016

Interview with Michael Brissenden, ABC AM

SUBJECTS:  Better working holiday maker tax arrangements; Budget savings; Enterprise Tax Plan; schools funding.

MICHAEL BRISSENDEN:

Joining me now here in Canberra is Treasurer Scott Morrison. Treasurer, good morning.

TREASURER:

Good morning, Michael.

BRISSENDEN:

So, what makes you confident that a backpacker won’t choose New Zealand over Australia where the tax is lower?

TREASURER:

Number one, it is Australia it is not New Zealand. I think Australia has a much better competitive offering in terms of our tourism product and experiences. You would expect me to say that as a former head of Tourism Australia but it is also true. Secondly, the research that was done in coming to this 19 per cent rate and you just heard that in your report then the money in people’s pockets because of the wages we pay, the income equivalency here puts us on the same wicket as Canada and New Zealand, in particular, as well as the United Kingdom. So, this outcome actually levels the playing field back on what the tax, with the application, the tax rate, the higher wages we have here and the higher purchasing power that means that backpackers will be on the same wicket if they choose New Zealand or Australia but the great advantage is they get to come to Australia.

BRISSENDEN:

It’s pretty clear there is still some concern in the crossbench. This has obviously still got to go to the Senate. Are you confident that you can push this through?

TREASURER:

I think this is a fair package. I think it is a sustainable package. Working holiday makers come out here for a working holiday – not a tax holiday. As you said, after the income tax free threshold was raised by Labor to $18,200 then basically backpackers were paying no tax at all. That is not a sustainable outcome. That is why these measures were first introduced to plug that hole. Now, we have come up with a very fair and reasonable package which deals with both the fiscal issue. So, the Budget is not compromised in this package but also I think we have not only addressed the tax issues with the backpacker sector of the economy but we have also addressed a lot of practical issues; increasing the age from 30 to 35 for eligibility, being a bit more flexible on the rules for employers which means you can work for one employer for more than six months you just have to change locations. Importantly, there is an integrity package here. We are putting $10 million to ensure that backpackers are being treated right when they come and they work here. Employers will have to register, that will support and assist our compliance activity and Fair Work and other organisations would be resourced to make sure that people are doing the right thing.

BRISSENDEN:

So, presumably, you have done the modelling, you do modelling for these sorts of things. Labor says it wants to see the modelling.

TREASURER:

Well, they can. We released it yesterday. The analysis which shows, on the income levels that backpackers receive, the money in the pocket after tax – it is all there. We offered them that briefing yesterday and I am sure once they have a look at those details they will support it. As they should because we have got to remember that the AAT has already made a decision that the tax rate should be 32.5 cents. The Government’s proposal in the 15/16 Budget has never been implemented. We deferred as you know at the last election. We said we would look at it if re-elected over six months. That was actually the exact same position Labor held. Labor didn’t have an alternative proposal to this, they adopted our position which was to have a review. We have done that review – not in six months. We have done it in less than three and here is the answer.

BRISSENDEN:

Ok, this was designed to save what? Something like $500 million over four years?

TREASURER:

Yes, there was over $500 million in revenue which had been booked in the 15/16 Budget.

BRISSENDEN:

So, will this do the same?

TREASURER:

Yes, it will.

BRISSENDEN:

So, just the $5 departure tax is going to…

TREASURER:

The cost of this set of measures that we announced yesterday is some $350 million odd and it is $365 in additional revenue that we will get out of these measures over the forward estimates.

BRISSENDEN:

You do seem to keep having to finding new taxes though, don’t you?

TREASURER:

Well, this is revenue for revenue position, Michael. If we are going to have a change to a revenue measure, which is what this was, it will be replaced by a revenue measure. That means the overall position on revenue hasn’t changed. In the Budget I handed down in May, on the revenue side, particularly on the tax revenue side, we had more tax cuts then we had tax increases. Just like we had more spending reductions than we had spending increases. The Budgets we hand down wash their face.

BRISSENDEN:

Budget repair is still a big job though. Ken Henry the former Treasury Secretary, I am sure you would have seen that the other day that he is now at the National Australia Bank. He has calculated that apart from your $6 billion of savings in your Omnibus Bill you will need another $360 billion to honour policy commitments and discharge debt. Is he right?

TREASURER:

The spending challenge is significant and a lot of that spending as Ken would remember…

BRISSENDEN:

So where does that come from?

TREASURER:

A lot of that spending as Ken would remember will be during the years in which he was Treasury Secretary telling the previous government to go household and go hard. So, one of the great challenges we have in the Budget, Michael, is that we have a lot of baked in spending measures from previous Budgets that go back even beyond the Rudd-Gillard-Rudd Government. Now, all of that is now baked in to what is around 25.8 per cent of the economy and expenditure. Now, our challenge is to get that down. Now, recently we have made changes, whether it is on superannuation, on pension asset tests or a range of measures – we have got over $6 billion worth of additional Budget measures on social services savings before the Parliament. In total we have got $40 billion worth of Budget improvement measures…

BRISSENDEN:

And you are still committed to a company tax cut which is going to cost $48 billion over time?

TREASURER:

It is going to drive investment which is going to lift real wages and it is going to drive job creation in this country. One of the other way you improve your budget Michael is you grow the economy. You have got to do things that grow the economy. Increasing taxes as a proportion of the economy doesn’t grow the economy. It slows it. So, you have got to get your expenditure under control and that is how you get your Budget back into balance. If you want to drive down debt then the way you do that, just as Peter Costello did it, is you grow the economy.

BRISSENDEN:

Can I just ask you the practicalities of this though? Are you going to be introducing it through as a split bill? Are you going to try and get first the Budget measure which is the company tax cut for businesses that have done up to $10 million first and then…

TREASURER:

I have already introduced the bill. The bill is already in Parliament and I have introduced the entire package that we put to the election and that is what is going to the Parliament.

BRISSENDEN:

So, there won’t be any compromises then in the Senate after that?

TREASURER:

Well, none have been offered but equally…

BRISSENDEN:

I am asking you if you would make any.

TREASURER:

We believe this is the right thing to do for the Australian economy. Real wages growth is half what it was a decade ago. Now, I don’t know how people think that real wages are going to grow unless you drive investment in this country. You are not going to drive investment in this country if you decide to tax it more. That is why the Government took the Enterprise Tax Plan to the people. We won that last election and we have put what we promised to the Australian people into the Parliament. Now, that will go to the Senate after it passes the House of Representatives…

BRISSENDEN:

And they will ask for some compromises, won’t they?

TREASURER:

And they, I assume, will seek to make amendments…

BRISSENDEN:

Yes, and you will look at them?

TREASURER:

But that will be for the crossbench or the Labor Party who oppose this – as does the Greens – to make that. But the Coalition’s policy is clear. We think you need to drive in private investment in this country because that is what supports jobs and that is what will support higher real wages.

BRISSENDEN:

My point is – is it all or nothing? Clearly you will be open to some sort of negotiation when this matter comes to it in the Senate.

TREASURER:

Well, this will be worked out in the Parliament.

BRISSENDEN:

Right, ok.

TREASURER:

But I don’t want there to be any suggestion because the Government is absolutely committed to this. Now, if the Parliament doesn’t wish to support that, that is the Parliament’s prerogative but it is the Government’s intention to drive investment and job growth in this country and to do that we think having lower taxes particularly for small and medium sized businesses is a good way to achieve that.

BRISSENDEN:

Can I just ask you then about school funding which is in the news after Simon Birmingham on Monday night suggested that the Commonwealth does spend too much money spending some of the wealthiest private schools in the country. Do you agree?

TREASURER:

What happened when Labor did their funding arrangements is they played favourites, they sold out states like Western Australia and it wasn’t a fair and equitable deal for everybody. Now, Simon Birmingham is going to take a package of funding, which is increasing from $16 billion up to $20 billion over the forward estimates, and he is going to come up with a fairer deal and I think a deal which is based on education need – not on Labor’s mates – and we will be taking that forward next year and he is in that process now.

BRISSENDEN:

But do you agree that you spend too much money funding some private schools?

TREASURER:

We are increasing funding for all schools – for all schools – by over 25 per cent. We are increasing funding for all schools and we are actually increasing funding for public schools by even more than we are for private schools over the Budget and Forward Estimates. The total pie is record. It is growing up to $20 billion. I know what the Labor Party is doing and Bill Shorten is doing what he always does. Bill Shorten’s agenda is to engage in cynical boogie man politics on every single issue. He goes out there, puts the sheet over his head as the big ghost, scary thing he does every day and he tries to scare the Australian people every single day. Now, that is not a positive plan for the economy. That is not a positive plan for the country. That is just Bill Shorten playing cynical boogie man politics every single day of the week. It is not helping the country go forward. It is all about Bill Shorten’s cynical, political agenda.

BRISSENDEN:

Ok, but why is the taxpayer funding schools like Sydney Grammar School at all?

TREASURER:

When you look at some of the research that is being done the proportion of what these schools spend and what the public funding is; the public funding as a proportion of what these schools spend on their students is very, very small.

BRISSENDEN:

Well, I know but why are we spending anything on them at all?

TREASURER:

All Australians pay taxes, Michael, and all Australians receive some sort of services for those taxes and some receive more than others, some people pay more tax than others, Michael. Some people on net terms don’t pay any tax at all and there is a growing group of those people in Australia today. Now, what we will do is ensure that there is a fair deal. A deal that is based on need and education funding and that is what Simon Birmingham is working towards. He is not engaged in cynical politics on this. He is trying to work with the states on this. I would encourage the states and territories to do that because there is the biggest amount of funding available for schools then there has ever been. We increased it by $1.2 billion in the last Budget. So, there is more money there but it has to be allocated based on need. That is the principal objective. Not on the sweetheart deals and mate’s deals that Bill Shorten did when he was Education Minister.

BRISSENDEN:

Alright, Treasurer we will leave it there.

TREASURER:

Thanks a lot Michael.

BRISSENDEN:

Treasurer Scott Morrison there.