19 October 2016
Transcript - #2016146, 2016

Interview with David Speers, Sky News

SUBJECTS: Labor’s refusal to back tax relief for Australian small businesses; social services portfolio; Labor’s refusal to stamp out militant behaviour in the construction industry; housing affordability

DAVID SPEERS:

With me now, Treasurer Scott Morrison. Thanks for very for joining me this afternoon.

TREASURER:

Hi David.

SPEERS:

So where does this leave your company tax plan?

TREASURER:

The bills are going to the Senate. This represents the plan we took to the election and Senator Xenophon has said what he actually said before the last election. The difference between Senator Xenophon and the Labor Party is that Chris Bowen has written books about why you should cut company taxes, Julia Gillard talked about why you need to cut company taxes, Wayne Swan, and the list goes on and on, Jim Chalmers. They all said this is a great thing you need to do, except when you're actually asked to do it.

SPEERS:

So where does that leave you. What are you going to do? Will you split the Bill and try and at least get a tax cut for those businesses up to $10 million?

TREASURER:

That's up to the Senate in terms of how they want to deal with the Bill…

SPEERS:

It's up the Government to decide…

TREASURER:

There are two important parts to this Bill. The 25 per cent over 10 years. But there is also the change to the definition of a small business. That is to increase it from $2 million in turnover to $10 million. So there are two parts to this legislation. That is obviously a piece that Senator Xenophon supports. Whether he's prepared to support higher levels, well, we'll see when the Bill ultimately comes into the Senate…

SPEERS:

But you'll try and get that part through won't you…

TREASURER:

Well that element of it is critical and it obviously has at least that much support in the Senate. How much support for further tranches - I mean, you're still talking about, in this parliamentary term, we went to the last election and we said we wanted to reduce the corporate tax rate, starting with small businesses. So we went to $10, and $25 and $50 million turnover and all of that would have happened in this parliamentary term. Now, no one can say that when we went to the last election we weren't very clear about this. We were returned at that election. We had a clear plan for growing the economy over the next three years and well beyond that. Just not on tax, but on innovation and science, on defence procurement, on export trade and more broadly on tax…

SPEERS:

But just to be clear, the Bill as it currently stands is for the whole ten year plan.

TREASURER:

That's correct.

SPEERS:

That's what has been put to the house and gone through. I'm just wanting to clear up though, you're not going to go all or nothing on that. You will take what you can get with businesses up to the $10 million.

TREASURER:

Well the Senate will resolve that David, that's how the parliament works. They'll vote for what they support in the Bill, and they won't vote the parts that they don't support…

SPEERS:

The Government is prepared to break it up?

TREASURER:

We want to see is passed David, so I'm not going to tell you here in this interview or in any other interview for that matter that I don't think we need to do this with corporate tax. Why do I think we need to do this? Because it's important to drive investment in the economy…

SPEERS:

I appreciate that but at some point in the Senate, the Government will have to say ok we will split the Bill.

TREASURER:

The Government always has to be practical about measures moving through the parliament. On the omnibus Bill we had to make some changes…

SPEERS:

Superannuation…

TREASURER:

On superannuation, but I stress on superannuation we ensured that the Budget position was unaltered, in fact was slightly improved by the changes we made. The same with the backpacker arrangements, we did not sacrifice the Budget to deal with those complex issues in either of those cases. Now, in this case, we do think it is important for investment but it's not the only thing we're doing for investment. The work we're doing with start-ups on taxes, the work we're doing for venture capital, the work we're doing for R&D and other issues more broadly, particularly in the innovation and science agenda, all of that is deemed to drive investment. Asset backed financing, another key area.

SPEERS:

On the company taxes, what did you make of Peter Costello? He doesn't seem to be a huge fan of this either, he said yesterday, he questioned is that a comprehensive policy – company tax, whoop-de-doo. What else is there?

TREASURER:

Well he was talking about the Business Council's arrangements, he wasn't talking about the Government's arrangements as I understand it. As I've just outlined there are a whole range of other elements to the Government's taxation plan which are already moving through the parliament, so it isn't just on company tax. We also passed income tax cuts when we came back, and those measures have already gone through the parliament. So there have been many more layers to what we're doing in the tax area, and we'll continue to look at ways in which changes to the tax system can boost investment.

SPEERS:

Now the Nick Xenophon team is also saying they'll vote against the welfare changes, it would save the Budget nearly $350 million. This is denying the dole to young people for four weeks, and reducing the age pension for those who are out of the country for more than six weeks a year. Will you chase similar savings elsewhere?

TREASURER:

With that $300 odd million, it's a bit more than that actually, but, there is still almost $6 billion of savings measures that we're pursuing in the social services area and I'll continue to engage with Senator Xenophon and their entire team. I met with him earlier today about some of these issues and we'll continue to engage. But the Australian public just expect us to get on with it. That's what we've been doing. Just this week alone, backpackers went through the House of Representatives, the ABCC has gone through the house as has the ROC legislation. Measures are moving through the House and moving to the Senate, and obviously we'll continue to work with people to ensure they pass the Senate.

SPEERS:

Particularly the no dole for young jobseekers, it was originally in a different form put forward in the 2014 Budget.

TREASURER:

Yeah one month and when I was Social Services Minister I took it back to four weeks.

SPEERS:

There's been troubles around it, you've tried to fix it up, now it's looking unlikely to get through as well. When do you wash your hands of this one?

TREASURER:

We're continuing to pursue a number of these measures and we need to remember that the reason they're not passing isn't just because of crossbench members, the reason they're not passing is the Labor Party doesn't believe that we need to control spending. Expenditure under the Labor Party was growing at more than 6.5 per cent a year in nominal terms. 6.5 per cent a year. As I said in the House today, debt was increasing when we came into Government at $3 billion a week. The way you fix that David is you've got to get expenditure under control and the Labor Party is saying, no no no we want to take a leave pass on getting expenditure under control, we just want you to jack up taxes. In fact, that's what the Shadow Minister Chris Bowen actually put to me in the House – why won't you increase taxes and my answer to him was because I think it will kill investment Chris, which kills jobs and growth.

SPEERS:

Looking at what you're doing in Government though, will you take this off the Budget books?

TREASURER:

They'll be a point at which those decisions will be taken in relation to the Budget, but we don't just sort of give up on these things David, and we don't give up on them because getting expenditure under control is how you return the Budget to balance. And if you don't return the Budget to balance then you then can't start on the work of arresting the debt. This remains the important job of this Parliament. Now ratings agencies themselves have said that. I met with S&P when I was in New York just the other week, and they are quite comfortable with our trajectory as set out in the Budget and they did not raise any additional measures that they thought we should be taking on revenue or expenditure. They wanted to see the parliament respond to the Government's plan.

SPEERS:

But if you can't get some spending cuts through do you look for others?

TREASURER:

Of course.

SPEERS:

So you will look for other spending cuts?

TREASURER:

Of course and ultimately if revenue measures are required but, our focus is on ensuring we bring the Budget back to balance and we have said very clearly that we need to do that by getting expenditure under control. Now you've phrased it differently to the way I would phrase it. The challenge the Government has is to get that cost curve which is like that, and flattening off. No different to any other business in this country which is facing rising costs and the Government has to live within its means and that means getting the cost growth under control. Labor were cajoled into having to support things they said they did before the election on some expenditure measures. We welcomed that. But they need to do a lot more if they're serious about trying to support a process which gets the Government back into balance. And to do that, you've got to get spending under control.

SPEERS:

Nick Xenophon is being a bit more cooperative it would seem on the ABCC. He wants some amendments though, and you've probably have heard what he's being saying about this. What do you think of some of the ideas, particularly nationally consistent rules on paying sub-contractors. Sounds pretty sensible doesn't it?

TREASURER:

Well I'll leave those matters to Minister Cash and the Prime Minister obviously. This legislation is incredibly important. All week in the parliament we've been making the case, as we have for several years now, that the thuggishness and the lawlessness in the building and construction industry is costing jobs, it's costing productivity, it's choking the building and construction industry, and we have case after case after case, and the Royal Commission went into this, of businesses being chased off sites, of people being stood over, and a union movement that boasts about it. Today I raised the case where they were going to shut down a site in Adelaide because they wouldn't fly the CFMEU flag off a crane for goodness sake. You can't have that, and expect to have productivity. 30 per cent more costs in the building and construction industry, that's 30 per cent more on hospitals, on aged care facilities, on roads, on ports, on schools…

SPEERS:

That's according to the Chamber of Commerce…

TREASURER:

And Master Builders.

SPEERS:

But you are prepared to make amendments to get this through is my question…

TREASURER:

This is incredibly important legislation David, and we're committed to seeing it through. We took it to an election and a double-dissolution election…

SPEERS:

But will you give a bit of ground?

TREASURER:

We're committed to getting this legislation through the parliament.

SPEERS:

Will you give a bit of ground to get it through?

TREASURER:

We're committed to getting the legislation through the parliament. It's so important. As the Prime Minister says, it isn't about union bashing, it's got nothing to do with that. That's what the Labor Party likes to address it as. It's got everything to do with economy boosting, as the Prime Minister said today. That's what it's about. This is an economic problem, and we need to fix it. These measures will fix that and we welcome the fact that Nick and other crossbenchers are showing a positive interest in the legislation.

SPEERS:

Can I turn to something your Treasurer Secretary John Fraser said today in Senate estimated. Well he is again talking about housing affordability. He has raised concerns about this before. He says it is a very real worry for him, it is a massive issue. Is it a real issue for you as well?

TREASURER:

It is. I am concerned about it and I will be giving a speech about this next week. Where I am particularly concerned is for those trying to get into the market. Those trying to get into the market in Sydney for example and NSW, it is taking two extra years now on the estimates from the research that has been done, than it was five years ago. I suspect in many cases a lot longer than that. The difficulty is for people to be able to get into that market. Now the way you address that principally is in the area of supply. People talk about the housing market like there is one in Australia. There is not. There are hundreds of housing markets in Australia and what is happening in Perth is different to what is happening in Sydney and even within Sydney you can move around different suburbs and find completely different markets.

SPEERS:

Is it just supply though?

TREASURER:

That is the substantive problem. Now when it comes to demand issues and the ability of people to save quickly and the measures that sit around that they are important issues but equally APRA took measures at the end of 2014 which saw the level of investor credit growth drop dramatically. That took some of the heat out of that investor market, considerably actually and the then Reserve Bank Governor Glenn Stevens and more recently Governor Lower have made reference to those APRA measures dealing with some of the demand side. But the problem with using macro measures is it falls on the fair and foul ground alike and where it might ease a problem in one place it hurts in another place and particularly when you are talking about negative gearing. When we talk about housing affordability everyone tends to focus on buying a house but lets' not forget 30 per cent of people rent their accommodation and people finding it harder to get into buying a house they are renting for longer and you don't want to do things that will then make rents more unaffordable which clearly abolition of negative gearing would do.

SPEERS:

When it comes to saving up for a house you might have seen this debate this week about whether young people are spending too much on expensive brunches like smashed avocado on toast rather than saving up for a deposit on a house. What do you reckon?

TREASURER:

Well it is not for me to lecture Australians about how they spend their money David. I don't make those value judgements about any Australians.

SPEERS:

So you don't see a generational problem here that this generation just aren't serious about…

TREASURER:

I will leave that to the social commentators. My job as Treasurer is to do everything I can to ensure people are in a position where they can get themselves where they can buy. We are particularly seeing this problem for those between 25 and 44 and we have seen their rate of housing ownership fall. The other thing we are seeing is people in their 50s still in mortgages. That can also present issues for when people go into their retirement and when they draw down on their superannuation they are clearing housing debt so these are all real issues. But let me make this point about housing values – it would be a mistake to say that housing is in a bubble. That suggests that somehow housing prices would collapse. Now if housing prices collapsed that would cause genuine concern in the economy. We do have high levels of household debt and that is principally around housing itself. But the values although they are in many cases widely unaffordable and are high they are also real values and those asset prices actually underpin things like our banking system where 60 per cent of the loan book of the banks are those housing assets. I make that point not to say housing is affordable, I think we have a housing affordability problem, but it would be wrong to say that is because of speculative drives in asset prices which are unsustainable and will fall off a cliff and undermine our economy. That would be a reckless thing to say.

SPEERS:

Just finally Treasurer John Fraser, the Treasury Secretary also said this morning on the tax debate that at some stage we have to return to the discussion at some indeterminate time, people have to consider, the tax mix switch issue. Is he right?

TREASURER:

Not on my agenda.

SPEERS:

So when your Treasury Secretary says we have to get back to this at some point…

TREASURER:

We have no plans to revisit that issue which I am assuming you are paraphrasing as GST changes.

SPEERS:

Well I am just going to what he says – the tax mix switch issue.

TREASURER:

Well if that is what that phrase is intended to mean then the government has no plans in that area as we said when we addressed this issue at the beginning of this year.

SPEERS:

inaudible.

TREASURER:

Well there is no appetite for it David. I have been there. I have had this discussion. We have done the numbers and to look at what would be required on compensation payments which would just lift the level of government expenditure at a time I am trying to get government expenditure under control -  his analysis as when other countries look at our tax system and the balance between consumption and income based taxes, those numbers speak for themselves. But I have to address the real world of Australian politics and our agenda is not focused in that area, it is focused in other areas where we can boost investment in the Australian economy, where we can provide tax relief to Australians. 500,000 Australians will benefit from the income tax relief we introduced in the budget and have passed the Parliament. So we are getting these things done. We don't just say we believe in lower taxes, we legislated to lower taxes and I am looking forward to be able to say the same thing for at least small businesses with turnovers of up to $10 million.

SPEERS:

Which brings us back to where we started. Treasurer Scott Morrison thank you for joining us this afternoon.

TREASURER:

Thank you for your time.