26 October 2016
Transcript - #2016153, 2016

Press Conference, Adelaide

SUBJECTS: Turnbull Government's Enterprise Tax Plan to drive economic growth, jobs and wages in South Australia; Senate negotiations; Nick Xenophon Team; Labor's refusal to back tax relief for Australian businesses; Nick Xenophon Team; budget savings; Labor's refusal to stamp out militant behaviour in the construction industry; housing supply; Census

TREASURER:

It's good to be back in South Australia. It's a great opportunity to come and speak to South Australian businesses about the challenges they're facing here in South Australia. The Turnbull Government is absolutely committed to seeing growth across our national economy and see the jobs and increase in real wages with that growth in business. And today I have the opportunity to sit down with a range of businesses, particularly those businesses that sit within that turnover of up to $50 million a year. In particular, there are some 680 odd businesses in South Australia that have a turnover between $10 million and $50 million a year and there are many more which have a turnover below $10 million. Our Enterprise Tax Plan is all about providing the right set of conditions for businesses to invest more in their businesses, to invest more in their employees, to invest more in the markets that they want to see grow for them and for them to be able to access supported by our export trade agreements and other measures we're putting in place. We want to ensure South Australia is getting its share of this growth. We've had 3.3 per cent through-the-year growth. We've just completed 25 years of consecutive annual economic growth. And we want to ensure that South Australia continues to have a big part of that going into the future. So whether it's our Defence industry procurement arrangements, which have been led by Minister Pyne here in South Australia and right around the country, or it's the export trade agreements or the Enterprise Tax Plan - all of this is designed to try and drive investment in the Australian economy and drive investment here in South Australia. So today, it's been a good opportunity and there'll be further meetings today where we're obviously talking about things like energy costs and transport costs for those businesses who are seeing more and more of their business here out of South Australia being sourced in other states – and we will talk through those issues so we have a good understanding of it, as we work through into next year's Budget.

But in addition to that, it is also about understanding how South Australia is looking to create and seize its own future. Today, I'm pleased that I'll also be meeting with the Treasurer, Tom Koutsantonis as well, which is a good opportunity to touch base on a whole range of issues and I thank Tom for making the time available for us to be able to catch up today

So that's why we're here, and we're looking forward to having those discussions with businesses, and we have much to get through the parliament this year, and of course the Xenophon Team – the Xenophon party, I should say – because that's what it is, a political party, and it holds a key balance of power in this Senate which will consider some major issues in the month ahead or so, in particular the Australian Building and Construction Commission Bill. Let's not forget it was here in South Australia that the CFMEU was going to shut down a site for a day because they wouldn't fly the CFMEU flag from one of the cranes on the site. That's the sort of intimidation and nonsense that we have to see rid of our construction industry, whether it's here in South Australia or anywhere else.

There are major budget savings which continue to need to be passed through the Senate to ensure that we can stay on track to meet the trajectory for returning the budget to balance. When we came into government, the Commonwealth was borrowing $3 billion a week. Now, we have more than cut that in half in three years and we need to go further to ensure that we maintain the support of ratings agencies around the world. All three ratings agencies since the election have confirmed our triple-A rating, but of course, S&P have Australia on a negative watch, which means that we need to ensure that Parliament passes savings that keeps us on track for returning the budget to balance. So, whether it's the Xenophon party here in South Australia or other members of the crossbench, but most importantly the Labor Party – the reason why parties like the Xenophon party are put in the mix of these decisions is because the Labor Party is not supporting, to the full extent required, the measures that are necessary to return the Budget to balance. So it will fall, ultimately, on many of these measures to the Xenophon party to decide whether the budget returns to balance in accordance to the trajectory that we've set out, or it doesn't.

QUESTION:

Are you hoping a round table puts extra pressure on the Nick Xenophon Team to adopt your tax measures?

TREASURER:

I've always had – I'm confident Nick would agree – a very professional dialogue with Nick Xenophon. We continue to have a very professional dialogue over this issue. But there's a difference in this parliament to the last one. In the last parliament, Nick Xenophon was one of eight voices. He had an opinion in the Senate. Now he has the balance of power on so many of these issues in the Senate. I think that really does bring a new responsibility and a new accountability to how these issues are dealt with. I appreciate the constructive engagement I have with Senator Xenophon, and he is dealing with what is a much greater responsibility now in this Parliament than he's had in the parliaments he's served in to date, and that obviously puts a lot of pressure on the workload and the issues that they have to get through. So we're obviously understanding and patient around that process. But it doesn't change the fact that many of the budget measures that are necessary to bring the budget back to balance will ultimately, given that the Labor Party's walking away from supporting the government to achieve those goals, it will fall to the crossbench to be able to ensure the Government can keep the Budget on track.

QUESTION:

Do you accept that it's looking unlikely that Xenophon will support the full package of those company tax cuts?

TREASURER:

Ultimately, that's a decision for him. As Nick often says when you get a mandate at an election when you take a package the Senate has a mandate to review it – for those senators who are elected to the Senate. Every single senator has been elected under a new electoral system which means, I think, they have today far, far greater support for their positions in the Senate than would have existed previously under the backroom preference-swapping arrangements that used to occur under the old voting system. So whoever's in the Senate got there because a lot of people voted for them. Here in South Australia, a lot of people voted for Senator Xenophon and his party. But that means that there's a great responsibility now to follow through on the outcomes that are necessary for South Australia. This is a state that has really struggled economically. It faces some very significant challenges. It's important that we work with Senator Xenophon on issues like energy security here in South Australia. That's one of the biggest issues that are coming up. The transport costs. But the business costs and ensuring that business costs can be made competitive here in South Australia so South Australian businesses don't leave. Now when I'm talking to South Australian businesses – they want to stay. I was meeting with a business this morning that, five years ago, 90 per cent of their turnover – this is in the construction industry – 90 per cent of their business was sourced from within South Australia. Five years later, 95 per cent of it is sourced from outside of South Australia. So that's the challenge South Australian businesses, I think, have and what they're facing and to ensure they can stay here, we need to help them to be as competitive as possible. Now, that's ensuring that they have energy security and reliable energy supply at a reasonable price. It's also about ensuring they've got a good set of tax arrangements. For small businesses in particular, and medium-sized businesses, our Enterprise Tax Plan is about supporting them in those areas. Now, he's already indicated that he would be supporting the increase in the threshold from $2 million to $10 million for small businesses and I welcome that. That will very good for South Australia. I'm disappointed the Labor Party have rejected that. They have rejected increasing the small-business turnover threshold for tax purposes from $2 million to $10 million. That's 100,000 businesses employing 2.2 million Australians who the Labor Party have said, "tough luck." Well, I'm pleased Senator Xenophon has decided to come that extra distance and I am seeking to encourage him to come on the journey a little bit further. But ultimately, that will be his call, and like all of us, we have to explain the decisions we make in the Parliament, and there are far greater consequences for the way the Xenophon Party votes in this Parliament than there were in the last Parliament.

QUESTION:

Another senator on a business journey is Bob Day. Do you think he should be staying in the Senate, or do you think it's time that he should leave sooner rather than later?

TREASURER:

They're matters for Senator Day, and obviously the issues with his business and so on are regrettable. This is man who built a business here in South Australia and, like many other businesses in South Australia in the housing sector, it's fallen on very hard times. But the law is fairly clear – very clear – about when a senator can remain in the Parliament and when they cannot. And I have no doubt that Senator Day will in no way be breaching those laws, and has no intention to. So as long as he's lawfully able to remain in the Senate, that's a matter for him when it comes to the timing of his removal to make his own decisions.

QUESTION:

Have you encouraged him?

TREASURER:

It's a matter for Senator Day. It's not a matter for me to give him advice on these issues. He's well aware of what the law is. In terms of his business and the employees that his business has supported – not just recently, but over a long period of time – and what I find amazing is the Labor Party are trying to compare Senator Day to Craig Thomson today. That is just shameful. It's absolutely shameful. Craig Thomson couldn't hold a candle to Bob Day when it comes to the contribution that Bob Day has made to the South Australian economy through his own business efforts. Now, it's unfortunate that his business has taken the turn that it has, but to make that comparison between Craig Thomson and Bob Day, I think, is grubby, and I think they should frankly apologise for making those slurs. So he will make his own decision. What the Labor Party is simply trying to do – once again – is distract attention from the fact that they do not want to pass laws that will restore the rule of law in the Australian building and construction industry. They want to let the CFMEU's reign just continue unhindered, shutting down sites for not flying a flag or because they want to intimidate and stand over people on work sites, whether it's in South Australia, Queensland, Western Australia, Victoria or anywhere else. Well, the Australian Parliament has the opportunity to stand up to the CFMEU, and Bob Day has always stood up to the unions on these sorts of issues, whether it's in his business or in the Parliament. I have no doubt why the Labor Party would hope that he would leave the Senate early, because they want to let the CFMEU's reign continue. It's our government's policy to improve productivity in the building and construction industry by restoring those laws that would re-establish the Australian Building and Construction Commission and enable productivity and jobs and wages growth in the construction sector to be boosted and supported by that measure.

QUESTION:

And you want him to stay on so you get that vote from him?

TREASURER:

That's again a matter for Senator Day. That is entirely a matter for him. He has to obey the law like anyone else. I'm not aware of any suggestion that Senator Day is seeking not to comply with those legal requirements. None whatsoever.

QUESTION:

He appears to have changed his mind about going sooner rather than later, though. Has there been any discussion with the Commonwealth, the Government, about that?

TREASURER:

As I've said, these are entirely matters for Senator Day. Entirely matters for him. It's for him to decide when he resigns and when he doesn't resign. He knows what the rules are, as does the rest of the parliament. As I've said, for the Labor Party to be putting a smear on Senator Day and equate him with Craig Thomson from the HSU scandals – remember, it was Craig Thomson that the Labor Party relied on in the parliament before last to keep them in government. And he kept voting for them, and Bill Shorten kept backing him in, giving effective character references for Craig Thomson. That's Bill Shorten's record when it comes to relying on those sorts of votes. So, I've got a tip for you, Bill – you might want to remain a bit quiet on this one.

QUESTION:

On radio this morning, you seemed to be suggesting that the Hanson Party is going to back your $6 billion cuts in welfare. Is that the case?

TREASURER:

They've been very supportive of the need to get the Budget under control and spending in these areas under control. I and the Social Services Minister, Christian Porter, have had many positive engagements with Pauline Hanson and her senators as part of her party and her team. They understand the need to get this done. So again, this matter will rest, given that the Labor Party's not prepared to get expenditure under control – they just want to increase taxes and increase the deficit as well – it's going to fall ultimately on Senator Xenophon's party as to whether those measures are successful. If they're not successful, obviously the government will have to look at other measures, because the option of not returning the budget to balance, the option of putting a higher tax burden on future generations, the option of increasing the rate at which debt is being accumulated in this country is not an option that the government's prepared to contemplate.

QUESTION:

The unemployment rate's the highest in South Australia. What was the sentiment in your round table about what's holding the state back?

TREASURER:

The major issues relate to energy costs, transport costs with more and more of the business that South Australians are attracting, they're actually outside of the state. South Australia is becoming increasingly an export state to the rest of the country in terms of its services and its products and materials, its food services. South Australia has great natural advantages in the areas of education and in tourism and in hospitality and service industries. The cost base for some of those sectors – putting aside energy costs, say in legal or accounting services and things like this – are very comparable to the eastern states. I think there's a lot to be confident on but, obviously, the state is going through a very significant economic transition. The country is going through a significant economic transition from the mining investment boom to a more broader-based economy. The fact that we've been able to do that and have the highest rate of economic growth of almost anywhere in the advanced world is a tribute to the ingenuity, enterprise of Australian businesses who continue to invest and find markets and grind out profits in difficult times. That's true here in South Australia as well.

QUESTION:

Question on land tax – New South Wales has indicated that it's open to the idea of scaling back stamp duty in exchange for the imposition of land tax. Is that something that you're looking at to free up more property?

TREASURER:

I welcome the fact that in New South Wales they're looking at issues which would rebalance their tax base which, in their view, believe would improve housing affordability in that state. That's the sort of discussion I was hoping to initiate with my speech earlier this week. My speech earlier this week was not designed to outline a whole range of new initiatives. The time for that will come down the track. My point earlier in this week was that the housing market has faced many challenges and pressures. But the most significant of those which is holding back the housing market, and people being able to get into it, has been around this issue of supply. Now, it's not a new issue, as many people have observed. And it's not just about the quantum of housing supply – here in South Australia, the situation is completely different to the eastern states. But in those states, the issue of supply being able to match demand, not just in volume but in where, and the type of housing mix, whether it's in high-density areas or mid-range areas or brownfield sites or places like this or one-bedroom units or a combination that's more suitable to people who want to downsize and they can't find that at the right price – it's a much more complex issue. When it comes to the issues of investors, investors comprise on housing finance commitments around about 30 per cent or thereabouts of the overall market. The owner-occupiers are around about 62 per cent or thereabouts. But APRA's measures, which were introduced at the end of 2014, have had the effect of mitigating, cooling, the effect of that investor sentiment in the market. This is an important point. A calibrated regulatory measure by APRA has effectively cooled off that element of hot investor interest. That was driving some prices in those markets. We've seen the number of interest-only loans fall quite substantially. We've seen the rate of growth in investor finance, for investors, fall from over 11 per cent to less than 5 per cent. So the macro-measures to deal with the demand side on the investment side have already been put in place, and we'll keep a close eye on that. Already just this week, APRA announced other measures which are also tightening lender criteria which is making assessments on a rate of interest serviceability of around 7 per cent. So investment and demand measures are already being addressed through macro-credential measures. Those rather finely calibrated measures had a massive impact on investor behaviour. So, could you imagine what would have occurred had Labor won the last election and they'd abolished negative gearing as they proposed, and the sledgehammer that would have had on driving up rents and undermining the value of everyone's home, which is a critical issue in terms of consumer confidence. That wouldn't have been good for South Australia, because that would have hit the national economy. And as I said, the South Australian economy is increasingly reliant on its exports into other states. If those states aren't doing well, South Australia won't do well.

QUESTION:

South Australia had a bit of a positive today, being named in one of the top five regions of the world for Lonely Planet. Do you think it's one of the top five to visit?

TREASURER:

Back in my tourism days, one of the things that South Australia does great, particularly on tourism, is they always support the national approach of getting people to come to Australia, but they've always been very good at making a great pitch as to why you'd come to this part of it. They understand their product well. It's a very competitive product. It's a great experience and I think they get that in the mix incredibly well. That's why I think tourism and hospitality, as well as international education, are great growth industries for this state. But obviously its heavy manufacturing base in the past will go through a transition. I remember being here during the election campaign and seeing businesses that once were providing services to the automotive industry, and are now providing services to other industries. They're rebuilding their businesses having gone through that transition. It's been really tough – really tough. But it's very encouraging to see how they've made their way through. So, I'm optimistic, and I look forward to having those chats later today, not only with the businesses who are joining us here, but when I catch up with Tom.

QUESTION:

IBM says it's negotiating with your department over a settlement for the census failure. Have you set a dollar figure on that?

TREASURER:

We know what our costs were. And that was set out the other day by the ABS in Estimates. We've been working, as I said last week, on the taxpayer not being left worse off as a result of IBM's failure in this area. I think what the hearings and other things have demonstrated is this year's census has met the standards and marks of the statistical reliability to ensure the census has been conducted properly, and has collected the data in the way that is necessary for that data to be useful for us. But IBM's failure on that occasion, on that night, was a very serious one which the Government was not impressed about, given the amount of assurances that had been provided to ministers, in particular, both by the ABS and by the ABS on behalf of IBM. So it's important that matter now be resolved and the taxpayer not be left worse off and I've been working to ensure that that's the case. But the issue is, in anything, when you're struck with a challenge – as we were struck with on that night – you can spend all your time engaging in the blame game that the Labor Party and others did, or you do what the Government did - the Prime Minister, myself, Minister McCormack - you just get on and solve the problem, which we did. We've ensured that the census has met as good and better of the standards of collection of any other previous census. In addition to that it has had the highest online response of any census. So despite its challenges, the Government worked through those challenges – challenges that came externally and still got the job done – and we'll make sure the taxpayer is not left worse off as a result of that. So, all in all, while very regrettable, when you're confronted with your problem, as a minister, it's your job to fix it and fix it we did.

Thank you.