7 August 2018

Interview with Tony Jones, 3AW

TONY JONES:

Treasurer, Scott Morrison, good morning Treasurer.

TREASURER:

G'day Tony, good to be here.

JONES:

Yeah what brings you to our fair city?

TREASURER:

Well I'm here speaking at a business lunch today, but we're also here to announce some further changes and support for ASIC and in how they're going about ensuring that our regulations in the banking and financial system in particular, but more broadly, are being properly enforced. We're putting an extra $70 million into what they're doing, but it's not just that. This is funding a new way of ASIC doing things. We need to have more effective enforcement of our corporate regulations and particularly in our banking and financial system. I think that the reason for that is fairly obvious. We've been working on this for some period of time, the new head of ASIC, James Shipton, brought to us a package of changes that he said he needed to have funded to get on with the job, change the culture of how ASIC gets about their business, you know, walk softly and carry a big stick, that's a good way to actually enforce regulations. You want the market to get on and do things; you don't want them to be always running timid all the time. It's important for our banks to lend, our companies to operate and not get snowed under a wall of compliance and all the rest of it. But at the same time, they need to know that if they do the wrong thing, they'll come down on them like a tonne of bricks.

JONES:

Ok, so you're going to say they're going to walk… so effectively, what we've got, we've got these corporate cops being put into the big banks?

TREASURER:

Yeah.

JONES:

Ok.

TREASURER:

Embedded, literally.

JONES:

Ok so you say they're walking softly, they're carrying a big stick, are they spies?

TREASURER:

Well no, they're part of how the place operates. This is the way of actually engraining your enforcement into the way the banks conduct themselves all the time. Just last Friday the Productivity Commission brought down their recommendations about competition. They suggested a public integrity officer, and I made some comments about that then. I think that idea has merit too. They're already people in the banks who report directly to the board, but what happens if the board doesn't listen to them?

JONES:

So are they going to work together?

TREASURER:

Yeah absolutely, and it's not about putting an extra person in from what the Productivity Commission is saying. There's already someone there who is doing that, you just need to give them the powers to pick up the phone to the regulators. But this is about having someone that is part of the process. My father was a policeman. The best cops are the ones who stop crimes from happening. I mean that's job one.

JONES:

Alright, so they're effectively cops?

TREASURER:

Of course they're cops.

JONES:

Right, ok.

TREASURER:

Absolutely.

JONES:

So they come in, and are they only working on the top floor? Are they ever going to be at branch level?

TREASURER:

No, they get the ability to move around, and that's all part of how they work.

JONES:

Move around the suburban branches?

TREASURER:

Well that's up to them and ASIC and it's how they work with each of the individual institutions. As we know from some of the things we already have seen, and the investigations ASIC were already pursuing that things can happen a bit further down the chain. They can happen at the top of the chain. We've brought in new laws to make banking executives accountable. They can be banned from ever working in the banking industry again if they do the wrong thing; they face very steep fines, a million dollars. That was the last time when Kelly and I announced some measured for ASICS. So tougher powers, bigger penalties, and now resources for them to get in there and make sure that they're heading in the right direction and doing the right thing.

JONES:

Ok so the banks are on notice here, all banks are on notice. You've got these corporate cops that have these wide-ranging powers that would sound, just from what you're saying now, that they're powers are almost endless. So they could one day be sitting in the board room at the Commonwealth Bank and then another day they could be going out to Commonwealth Bank Ferntree Gully and just walk in there with unfettered powers?

TREASURER:

The operations I'm going to leave to James Shipton and how he runs it. I'm not going to sort of telecast how he would operate this any more than a police minister at a state level would telecast how they would go and do things. But it's important that they have a good working relationship with the bank, this has been worked on with the banks to make sure that this works smoothly and effectively. They want these things to be fixed too, I think that's true, and this is just another thing that is being done to set all this right.

JONES:

Now, I mean you've got to be across everything of course, and there are a lot of things done underhandedly as we know from the Commission. So do they have the powers to actually listen in on phone calls? Do they have the power to listen in on meetings? I mean will they be in the boardrooms?

TREASURER:

All the normal rules apply to how these things work. So there's nothing new there, this is simply a process of embedding the regulatory officers, the cops on the beat, in ASIC, inside these institutions so they're not down the road or arm's length removed. They are having a much better visibility on what is occurring and a preventative capacity as well. In a lot of cases I think there'll be an opportunity for good advice along the way. Often people will breach a regulation inadvertently because they don't know, or ignorantly. We can stop that as well. Sometimes it's done for more malevolent reasons, and that's a more serious issue. But I think what this will be is a very, just a practical step to keep everybody inside the lines which is where you want them to be. And you know, it's like a ref. The best referee, I reckon, is the one whose whistle you never hear. But everybody knows they're going to ensure that the game is played according to the rules.

JONES:

Alright so what do the banks think of this? They welcome it?

TREASURER:

Yeah they support it.

JONES:

I couldn't imagine them rolling out the welcome mat.

TREASURER:

Well look, whether they are popping champagne corks or not is not really my concern. My concern, and Kelly O'Dwyer's concern, is to make sure that the regulations that we have are being properly enforced. That the penalties that are there for those who don't comply with those regulations are tough enough to deter that behaviour in the future, and we've certainly done that on the penalties. These are the toughest corporate penalties we've ever seen. Last financial year, we had the biggest award against a bank and against any corporation in Australia's history. Some $800 million the Commonwealth Bank had to come and pay out, and that wasn't the product of the Royal Commission or anything like that, that was the product of our regulators simply doing their job and doing it well.

JONES:

Who is forking out for this?

TREASURER:

Well this comes as part of the regulatory cost that we recoup from the sector.

JONES:

So how much is it going to cost?

TREASURER:

$70 mil, and it comes out of the sector. So taxpayers won't be funding this, the sector will be paying for this.

JONES:

Not in any way, shape or form, the taxpayers?

TREASURER:

That's 70 million bucks which comes out of the financial industry. That's how ASIC is actually funded. Same with APRA.

JONES:

I just wonder, having worked in a bank many, many, many years ago, I remember auditors were always met with a great degree of suspicion, and whenever they came in with their green pens in their top pocket they were treated like lepers. I'm just wondering how these corporate cops, these spies if you like, are going to operate in an environment where they're not welcome.

TREASURER:

Well I don't think they'll be not welcome, because I think what has been occurring over several years now is a massive wakeup call in these institutions and their task is to go about changing their culture. You can't legislate culture. You've got to change it. That is the leadership that is required from the CEOs and executives and boards, to change the culture of their organisations. And I've got to say that's true also for the regulator in ASIC's case, and I think that James Shipton is doing a great job in trying to change the culture at ASIC, where he is working with people to get better outcomes. Because at the end of the day, all that matters is that these organisations stay within the lines and do what they're supposed to do. I think ASIC getting this additional support, I mean this is basically the Government backing in the new chair of ASIC's plan to ensure that ASIC can be up to the job of being a good and effective and competent regulator.

JONES:

So how many of these spies will be implanted?

TREASURER:

Well again I obviously wouldn't go into those sorts of operational issues…

JONES:

No but I mean roughly.

TREASURER:

I should say, it's not just about putting people in the banks. The other thing this package does is looking to simplify regulation. Now there's a thing called RegTech. What this basically means is rather than having encyclopaedia verses of corporate regulation, that this is actually now done through computers, through technology, and it actually steps people through about how they can be compliant with regulations without getting a numbing headache. And that's another area of reform that ASIC will need to lead. Now, Australia is one of the world leaders in the technology to support this sort of thing, so this will be a good business for many Australians. And the better outcome is that it means corporate laws will be simpler for small businesses, for large businesses, and you know the simpler the law is the easier it is to enforce and the easier it is for people to comply with.

JONES:

Yeah I get that, but if you say you're putting in $70 million aside, it's a fair budget, so are you putting together a squad of spies?

TREASURER:

Well look, I don't think you should call them spies. I don't think that's a helpful description.

JONES:

Well they are.

TREASURER:

No, no, they're law enforcement officers in corporate regulation and in the banks. They're there to do their job…

JONES:

Will are they going to be identified?

TREASURER:

I mean we don't call police spies, do we?

JONES:

Well if they're going in to basically sit in on things…

TREASURER:

Yeah but they're not going in covertly.

JONES:

Well what do you want to call them then?

TREASURER:

I want to call them law enforcement officers. I want to call them cops on the beat.

JONES:

Well I can tell you everyone working at the bank will call them spies.

TREASURER:

Well they can call them what they like, but what they're there to do is to be a cop on the beat and their beat is in that bank and that's where they'll be.

JONES:

And how many will there be?

TREASURER:

Enough to do their job, James will make that call.

JONES:

Right, so presumably you'll have more than one at head office, and then you'll have a squad to actually go around the branches?

TREASURER:

Well of course you'd have a team of people working on this but that's going to be sorted out between ASIC and the bank. It'll depend on how they intend to pursue that, I'm not going to tie them up in knots as the Treasurer, saying 'you've got to have this many here, and this many here'. I mean that's why we have a chair of ASIC.

JONES:

Alright let's move on.

TREASURER:

Sure.

JONES:

Company tax, how are you going with that?

TREASURER:

We'll see in a couple of weeks.

JONES:

Confident of getting it through?

TREASURER:

Well we continue to push the case and we think it's a strong case, that businesses should have competitive tax rates. Because if they don't, if they don't have competitive tax rates, people's jobs will be more at risk, people wage rises will be more at risk, the Australian economy will not be able to compete with businesses offshore. I mean take Qantas for example. Qantas has around 13,500 small businesses that are part of their supply chain. If everyone is paying more tax for those larger businesses then what's that going to mean for small businesses who actually live off those large businesses? I mean, it's one economy and we've got an opportunity here and it could be a very singular opportunity to get this right, to get our tax rates competitive for our businesses because people's jobs depend on it.

JONES:

Alright so if you reckon you're going to get that through in the next couple of weeks, so obviously it's going back to the Senate…

TREASURER:

Of course.

JONES:

How are you dealing with the Derryn Hinch's of this world that want that capping at $500 million? There are some of those crossbenchers that want it at $200 million. What sweeteners have you thrown in there?

TREASURER:

We deal direct with them and that's where we have those conversations. Mathias and I never have these conversations in public or in the media. What we do is we get in there and Mathias leads those negotiations and we seek to get the outcome. It's not the first time we would have achieved it if we we're successful again in a few weeks' time. Remember personal income tax cuts. Everyone was saying oh you are going to cut this in half and you're going to do this and do that. No, we put the whole package in and now every single Australian worker in the country who pays tax will have a tax cut. Now the Labor party wanted to rip that tax cut away from millions of Australians and we insisted that this was the right thing to do for the Australian economy and as a result, under our plan, 94 per cent, now law, of Australians will not face a marginal tax rate of higher than 32.5 per cent as part of this plan. Now we stuck to our guns on that and we've got the right outcome. And what the Labor party want to do, and they will reverse this by the way. Remember, if Labor gets elected, they'll put up your personal income tax, they will put up your business tax, they will take away your tax refund if you're a retiree for your imputation credits on your Australian share investments, they'll put up a housing tax by abolishing negative gearing as we know it, they'll increase capital gains tax on everything by 50 per cent. Now that is a massive $200 billion tax slug on all Australians. How that keeps your job secure, puts your wages up, grows the economy so we can afford hospitals and schools I've got no idea.

JONES:

Ok but getting back to the company tax, are you closer to the threshold? Are you closer to coming up with a ceiling?

TREASURER:

All will become very clear once the Senate finally deals with this matter in a few weeks' time.

JONES:

The by-elections, the Super Saturday, did that send a message that has changed the view in any way, shape, or form?

TREASURER:

Having competitive tax rates was important before the by-elections and it's important after the by-elections.

JONES:

Ok. So this time in three weeks you'll be sitting here with Neil Mitchell talking about how you got it through?

TREASURER:

Well we'll see what happens. That's a matter for the Senate. But this is the right thing to do for the Australian economy. The politics, as I've said before, is difficult. It's always difficult to do these things. But the economics is right. Bill Shorten said the economics was right. If he now has back flipped, which he has, and he now says the economics is wrong, that just makes him a hypocrite. I'm simply acknowledging that the politics is difficult but the economics, what is right for people's jobs, what is right for people's incomes, what is right to drive an economy that can afford hospitals and schools, this is what we should focus on, and we've got a window of opportunity, just like we have with the National Energy Guarantee later this week. This is a big opportunity for lower electricity prices.

JONES:

Alright, just a few other issues I want to touch on because I know you're pressed for time.

TREASURER:

You're alright.

JONES:

The population, the Australian population, is about to hit a milestone at 25 million around about 11 o'clock tonight it's estimated. Can we cope?

TREASURER:

Well, coping means continuing to invest in infrastructure. That's why we've got a $75 billion infrastructure plan. The biggest single commitment to infrastructure spending in this year's Budget was in Victoria and that was obviously headlined by Tulla Rail but that wasn't the only thing we are doing in Victoria. So there's a big investment in infrastructure in Victoria. That includes infrastructure down Frankston way and particularly down towards Geelong. I was meeting with some people from Geelong last night. They are seeing very strong growth in Geelong as a result of, there's obviously housing a bit cheaper down that way, and people are making that choice. And there's a very significant growth corridor and they're planning for that.

JONES:

So what is the infrastructure around Geelong then?

TREASURER:

Well there's the rail line. It's the extension of the rail line and the duplication. And there are other projects there which have been highlighted. We've invested in the Avalon Airport and its upgrade which is getting Air Asia in there which is going to support their regional economy. Down Frankston way it's the extension out to the Baxter line – that's what the Federal Government has put in to support that infrastructure. I've already mentioned Tulla Rail…

JONES:

Which is all fine and dandy but unfortunately the population growth is quicker than what we are seeing the infrastructure growth actually come to fruition.

TREASURER:

We've invested so much in infrastructure now that the feedback we are getting is that we are reaching the country's capacity to actually build it. The draw on our population and our skills and the projects, this is putting now quite a strain on the ability of all these companies to actually go out and build all this infrastructure. So we have pushed this to the absolute limit in terms of what can be invested in. Whether it's our City Deals or other things we are doing from Townsville to Western Australia to here in Melbourne and Sydney and other places, there's an enormous amount of work going on. But there has to be to support that growth that we're seeing in our population. And as you know, that growth in the population is being driven predominantly by temporary migrants. It's being driven by the resurgence in education visitors to Australia and visas in the international student industry. And Melburnians in particular, but Victorians more generally, know how important that sector is to the Victorian economy. I mean it supports thousands upon thousands of jobs.

JONES:

Ah yeah ok well I wish we had more time to debate that one, but the Tampon Tax – finally some movement on that. Now I know that this is an opportunity for you to whack the states, but…

TREASURER:

No I've got no interest in doing that, I mean this is an anomaly that will get sorted out. I'm not running a campaign or anything like that; I mean it's an anomaly that we're just going to sort out.

JONES:

When?

TREASURER:

Well the meeting should be in September or October and I hope that the states will see common sense and support it. You know there's not some sort of gender conspiracy here or anything like that, it's an anomaly, I'm proposing to fix it. Joe Hockey gave it a go, the states rejected it. That's true. It's always been our policy since then that if the states wish for it to be removed then of course we would facilitate that. I mean I wrote back to them in June, I didn't sort of go out and ring a bell then, I just wrote to them quietly and said I'm going to put this on the next agenda and that's all I announced on the weekend. So there's already been some positive response to that. It's not tax reforms, I'm not suggesting it's wide-scale tax reform, it's just an anomaly that will be fixed and I believe with the support of the states we'll get that done.

JONES:

And you'll get that support?

TREASURER:

I believe so at this stage, but you know we'll have the meeting and they'll come forward. We've put in changes to the GST which will see around $6.5 billion extra come into the states over the next four years. So we've put the GST on low value goods that people buy from overseas to level the playing field for our own retailers here, and in Victoria I know that's been a particularly big issue. We've put the GST on digital services like Netflix and things like that which didn't have it before. All of this, and there's compliance issues around the black economy, that means the states have picked up about $6.5 billion extra in GST from the initiatives we've taken as a Government. Now not one cent of that goes into the Federal Budget – it all goes to the states. So tidying up something which is around 30 million bucks a year is something I'm sure we can accommodate.

JONES:

Now one of the issues we're going to address a little later on in the programme – swearing in the workplace.

TREASURER:

Yeah…

JONES:

You swear?

TREASURER:

No I wouldn't say I work blue. I try to check my own language, I've got to say.

JONES:

What about around your office?

TREASURER:

No, I don't think that's a good thing for a workplace, in my own view. But I'm not a nark about it. People's workplaces and how they conduct themselves is a matter of personal responsibility. Personally I don't think it's a great look but you know I can't say that on all occasions I honour that.

JONES:

It does slip out from time to time? TREASURER: Well the Sharks went down by one point on the weekend to Manly and I had to check myself very carefully because my nine-year old daughter was sitting next to me, and I wasn't happy.

JONES:

Well hopefully there are a few expletives on Sunday because your Sharks play our Melbourne Storm.

TREASURER:

Yes it'll be a great game.

JONES:

It should be a terrific game.

TREASURER:

If you're in Melbourne get to that game [inaudible] this weekend, people in Melbourne get to that game. That will be I think one of the really great games of the year, Sharks-Melbourne. When we play Melbourne it's always a torrid contest and the Sharks often come away the winners, particularly in grand finals, so I'm looking forward to that.

JONES:

Just one final one on your bank spies, sorry cops, the banking union – has this been run by them?

TREASURER:

Look, ASIC work through all the stakeholders ok? So my understanding is they would have worked that through.

JONES:

Right Ok, alright good to see you.

TREASURER:

Thanks a lot, thank Tony, good to be here.

JONES:

The Treasurer Scott Morrison.

TREASURER:

Go the Sharks.

JONES:

The final word, Scott Morrison, we'll take a break.