20 October 2016
Transcript - #2016148, 2016

Interview with Fran Kelly, RN Breakfast

SUBJECTS: Australia’s triple-A credit rating; jobs data; Senate negotiations; MYEFO; Labor’s refusal to back tax relief for Australian small businesses; the classification of the Adler shotgun; Labor’s failed border protection policies

FRAN KELLY:

Treasurer Scott Morrison is in our parliament house studios. Treasurer welcome back to breakfast.

TREASURER:

Good to be here Fran.

KELLY:

What has Treasury advised you in terms of the risk the triple-A credit rating?

TREASURER:

There’s no real change here Fran. It’s always been the issue that ratings agencies, and I stress all three have actually affirmed Australia’s triple-A credit rating since the election, the issue with S&P is, as you know, they put it on negative watch. They’ve said over the next six to 12 months they’ll be watching closely. The thing they’ll be watching is this. Now, I met with John Chambers, who is the head of their sovereign risk area in New York a couple of weeks ago. He reaffirmed the point that we have a trajectory to Budget balance, that we have measures to achieve that, and there were no additional measures or alternative measures that were suggested to us. It’s a matter of implementing and legislating the plan that we have. In the first few weeks of sittings, we’ve actually passed through the Parliament more than a quarter by value of the Budget improvement measures that are part of that plan. That’s encouraging and that was welcome news to S&P. Moody’s and Fitch have actually been more positive. They’ve affirmed the ratings without any qualification at all. So we’re making progress. The issue is we’ve got to keep making progress and that is a very strong message to the Parliament.

KELLY:

Well it is a strong message to the Parliament. I’ll come to this in a moment. But also, Craig Michaels, the director of S&P in Australia is quoted as saying today ‘whether we maintain our triple-A rating or not, partly rests on the Government’s willingness and ability to enact new Budget savings or revenue measures to reduce fiscal deficits materially over the next few years’. So they’re talking about new budget savings or revenue measures…

TREASURER:

That wasn’t a message that was provided by John Chambers and I stress what Mr Chambers said when we were in New York is that he understands the plan that the Government has, and there’s a clear plan to return to balance. Now, the local member here would be referring to instances where the Parliament did not support that plan. Our view is that we took that plan to the election and we were very clear about it, all of those measures, some $40 billion in outlays and revenue measures, $25 billion of those were on the expenditure side, $15 billion on the revenue side. We’re doing not only tobacco excise which has already passed through the parliament on the revenue side, there are the superannuation changes to make it fairer and more sustainable. That will be another $3 billion, and the Labor party will have the opportunity to support that. We’ve reengineered the backpackers arrangement, that’s over $550 million with the other measures that are attended to that. So, we’re taking the steps, we’re putting the measures into the Parliament. We’re getting on with the job. The issue is why is the Labor party refusing to support getting expenditure under control? The simple answer is this, they prefer to raise taxes on the Australian people and we don’t think that’s the path back to Budget balance.

KELLY:

So given everything you’ve said this morning, it seems pretty clear that you’re not unhappy with this front page of the Australian today, because it’s given you this chance to put a rocket up the opposition basically to pass your Budget measures. Is that what this is all about?

TREASURER:

I think this is the message; we have a plan to return the Budget to balance. That involves both expenditure savings measures, predominantly, because that’s what is actually preventing us from getting back to Budget balance. We have Budget revenue measures which are about improving the integrity of the tax base, they’ll be our diverted profits tax legislation which comes in later in the year. We were able to pass our multinational tax avoidance legislation last year despite the Labor Party opposing it. The other thing that we’ve got to do is grow the economy. We’ve got to grow the economy and that requires attracting investment and that’s why we put forward the plan we did on taxation for corporates, particularly small to medium corporates, to provide the incentive for firms to invest, which will drive the economy, which will support higher real wages and support higher levels of profits.

KELLY:

That brings us to one of the Government’s, as you said the centre piece of your Budget, the business tax cuts, I mean, you are in control, you are the Government, so if Australia loses its triple-A credit rating that will be on your head. The business tax cuts, that’s a centrepiece of your policy, and it’s pretty clear from the conversation we had on this programme yesterday with Senator Xenophon, that he certainly is not going to give you the votes to get your entire business tax cut policy through. He’s going to only allow you to look at tax cuts for businesses with turnovers of less than $10 million, so what will that do to the centrepiece of your plan?

TREASURER:

Well let’s start with that. In this term of parliament what would have been effective, was the cuts for companies with a turnover up to $50 million. That’s what would have actually happened in this term of parliament…

KELLY:

You’re not going to get that…

TREASURER:

We’re still talking to Senator Xenophon about this, what Senator Xenophon did yesterday, and I met with him yesterday, is he restated the position he had before the election. That’s what he said before the election. There was nothing new about what Senator Xenophon said yesterday and we’re still talking to Senator Xenophon. I mean take for example in South Australia, one of the companies between $10 million and $50 million is Haigh’s chocolates. I mean that’s a significant company in South Australia…

KELLY:

Best chocolates in the country.

TREASURER:

I don’t disagree and neither do my two little girls. If I get to Adelaide I try and make sure, like most of us, we bring something back. That company wants obviously to do well in South Australia and they would benefit from the corporate tax rate for that company being reduced. Now Haigh’s chocolates is not Microsoft. It’s not…

KELLY:

So what’s the turnover for Haigh’s chocolates?

TREASURER:

They’re less than $50 million.

KELLY:

Are they less than $10 million?

TREASURER:

No, they’re not less than $10 million, they’re bigger than $10 million and this is my point. There is an opportunity I think to broaden this discussion. In this term of Parliament what we had hoped to be in place would be that change for companies up to $50 million. Now, we’ll continue to pursue that. But as Nick always says, and look he’s right about this, the Parliament at the end of the say is sovereign, and they’ll decide which of the Government’s measures they will approve and not approve.

KELLY:

And in a sense, getting back to the triple-A credit rating thing and the whole notion about revenues, the Senate might save you from yourself, because the cost of your businesses tax cut policy was a whopping $48 billion. This is a cost…

TREASURER:

Over 10 years Fran. We’re talking about over the next few years, and we’re talking about companies up to $50 million. We’re not talking about…

KELLY:

Well you can’t even tell us how much that’s going to cost according to Treasury at estimates yesterday. How much is it going to cost for this tax cut to businesses with a turnover of say less than $10 million.

TREASURER:

Of less than $10 million? That figure is about 1.4.

KELLY:

Well Treasury couldn’t provide that in estimates yesterday.

TREASURER:

Well I’ll leave that to Treasury but that figure is roughly around about 1.4. And that is an investment Fran in small businesses investing in their own business and investing in their employees. That’s why I’m pleased that Senator Xenophon and Senator Hanson and her team and Senator Leyonhjelm and then previously Senator Day have indicated their support for ensuring small businesses get the support and encouragement they need to be out there employing and investing in their businesses every day.

KELLY:

But as I say they’re saving you from yourself if they take the upper group of tax cuts out of your ten year equation because that was going to cost $48 billion, including as we heard repeatedly through the campaign $7.5 billion of tax cuts for the four big banks.

TREASURER:

I notice your enthusiasm there Fran on accentuating the word billion…

KELLY:

Well it’s true isn’t it?

TREASURER:

Well it is Fran and it’s an investment in the Australian economy to drive investment and to drive jobs growth. Now, you know that Chris Bowen, Bill Shorten, Julia Gillard, Paul Keating, all of these people were enthusiastic supporters of reducing the rate of corporate tax, Chris Bowen even wrote books about it, as a way to drive investment, to drive jobs, and to drive growth…

KELLY:

And you know that all of those say that it’s part of an overall tax plan that has different tax mechanisms somewhere else to offset that.

TREASURER:

Ours was fully funded Fran. It was fully funded not just over the Budget and forward estimates but over 10 years as the medium term projection on the underlying cash balance demonstrated. So this was a plan to invest in ensuring that companies could go out there employ people, invest in the future of their businesses. We’ve got to get the Budget back to balance. But we’ve also got to get the economy at the same time Fran. And that’s what this Government is focused on doing. I mean, in the last year alone, 220,000 new jobs, growth through the year of 3.3 per cent, nominal growth for the first time in two years at 3.4 per cent being higher than the real GDP growth rate. What we are delivering for the Australian people is jobs and is growth. We’ve had 25 years of consecutive annual economic growth. We won’t get another 25 years unless we have the right conditions in place, and that means the right tax conditions which is encouraging businesses to invest in their businesses and invest in their employees in higher real wages, driven by higher productivity.

KELLY:

It’s a quarter to 8 on Breakfast, our guest is the Federal Treasurer Scott Morrison. Scott Morrison can I ask you about an issue that is dominating the Parliament, question time anyway at the moment. This whole issue of the classification and the importation ban on the Adler shotgun. Tony Abbott said yesterday that, this is a quote, ‘with a heightened terror threat there is just no way any serious Coalition Government in the tradition of John Howard should be allowing rapid fire weapon on a very large scale into our country’.

TREASURER:

This Government is not.

KELLY:

So you will not? So you will not, this Government will ban the importation…

TREASURER:

This Government is not doing that. This Government is not. We have a ban in place.

KELLY:

I know. But it is up for discussion at COAG with the states isn’t it?

TREASURER:

That is a matter for COAG and the states to determine what the classifications are in each of these ratings. But let me tell you what this Government has done about guns. We have restored the funding to what is now the Australian Border Force, which has previously been gutted by the Labor Party. And I remember this very vividly, 220 Glock pistols were imported into a post office in my electorate in Sylvania Waters. We are now finding those guns entering Australia, courtsey of the weak boarder protection policy of the Rudd/Gillard/Rudd Government at crime sites all over New South Wales. Now, that’s their record on guns, that’s what Bill Shorten and his mates did when they were in Government. 220 Glock pistols Fran imported into Australia under the weak boarder protection arrangements where they had reduced container screening, they had reduced the funding to the then Customs and Border Protection service. This is the same Government under Rudd/Gillard/Rudd who approved, who oversaw the approval of the renewal of the visa for Alex Vella, the head of the Rebels Motorcycle gang.

KELLY:

I just want to get clear on the Government’s position on the Adler guns because yes, you were right, there is an importation ban in place at the moment. It’s up for discussion with the states who get to decide what classification these guns could have.

TREASURER:

Correct.

KELLY:

But even if the states reclassify them to a….

TREASURER:

Fran you’re putting words in my mouth, let me make very clear what I’ve said. It’s the same the Prime Minister has said. The classification ratings for these fire arms are set by the states and territories through their process. The fire arm we are referring to is currently at the lowest of those ratings and that is what was put in place under the ratings arrangements under the Howard Government’s reforms. Anything that is done to those ratings will see the protections improved, strengthened. Not weakened.

KELLY:

I understand, so if the states do reclassify with those, as you say, strengthened restrictions, will the federal Turnbull Government lift the importation ban?

TREASURER:

We have a ban in place and that’s a matter that’s entirely up to the states and territories. I’m not about to forecast what they are going to do.

KELLY:

But the importation is up to the Federal Government.

TREASURER:

Fran, I think I’ve been very clear, it’s for the states and territories to set the classifications around fire arms, and then that’s a matter for the Government once they’ve made their decision. Now they haven’t made a decision so I can’t speculate on what their answer is going to be but what I do know Fran, is our Government has strengthened our border protection laws which has stopped these guns coming into the country. You won’t find guns that are held by legitimate fire arm owners who take all the proper precautions about the storage of those weapons in accordance with the rules, you don’t find those guns ending up at crime scenes, what you find is guns that have been imported by bikie gangs, and others. Remember bikie gangs. The previous Government approved the visa renewal for Alex Vella. Alex Vella, the head of the Rebels motorcycle gang. Now I remember this because I cancelled his visa. He has stayed in Malta ever since. Successive ministers, whether it was Minister Bowen when he was immigration minister, Minister O’Connor when he was immigration minister and Minister Burke, all of them, had the opportunity to cancel his visa, and they all gave Alex Vella a big green light to stay in Australia. Shameful.

KELLY:

Treasurer, thank you very much for joining us on Breakfast.

TREASURER:

Thanks a lot Fran, good to be with you.