21 November 2016
Transcript - #2016162, 2016

Interview with Michael Brissenden, ABC AM

SUBJECTS: Mid-Year Economic and Fiscal Outlook; Deloitte Access Economics Budget Monitor; Turnbull Government’s Enterprise Tax Plan to drive economic growth, jobs and wages; Labor’s refusal to back tax relief for Australian businesses; Grattan Institute.

MICHAEL BRISSENDEN:

Scott Morrison good morning.

TREASURER:

Good morning, Michael.

BRISSENDEN:

Jobs and growth, as we remember, was the mantra you took to the election. Chris Richardson there says that wages and jobs look set to under shift the official forecasts and that the rate of growth that underpinned the Budget forecasts isn't happening. Is that what we're likely to see in MYEFO coming up in the next couple of weeks?

TREASURER:

MYEFO will come out on December 19 and that will have the advantage of the September quarter National Accounts and some other collections data. I think it's important to remind ourselves that the jobs and growth over the last year was 3.3 per cent in terms of growth leading the advanced world and jobs growth over 200,000. So the Government is delivering jobs and growth. But Chris Richardson is right to point out that it is actually the wage earnings and the profit earnings of companies, wage earnings of working Australians and profit earnings of companies, that has the most significant impact on revenue. And while all of the commodity price positions have improved since the Budget, what is more impacting is the issue of these wage earnings, and so...

BRISSENDEN:

They're at record lows aren’t they according to…

TREASURER:

The world is in a global funk when it comes to wage growth and prices growth all of these issues, which makes our growth performance and our job performance all the more extraordinary. But if you want people to work more hours, which we do, and the latest employment figures shows that that is one of the challenges that we have, to get people to work more hours, the last thing you do is tell the businesses that are employing them that they're going to have to continue to carry a higher tax burden, particularly in comparison to other countries who they're right in that market with every day.

BRISSENDEN:

We'll get to the company taxes in a moment. Your pledge was to balance the Budget by 2021? You won’t get there…

TREASURER:

No what I said was that the projections based on the parameters at the time, was that the Budget would return to balance in 20-21. I've always been very careful about that, Michael, and that's why I pull you up on that. I know others in the past have made bold predictions and promises about these things. The 20-21 Budget balance position was a projection based on those numbers. These numbers move. They always have…

BRISSENDEN:

Right, so if the numbers aren't there, you won't get to that?

TREASURER:

That's simple arithmetic but no one has made that call yet and no one is suggesting that yet.

BRISSENDEN:

On the current figures, I guess you'll make another assessment after MYEFO presumably…

TREASURER:

Yes.

BRISSENDEN:

But what do we think of Chris Richardson's projections then?

TREASURER:

Again, I think what he said about the revenue side of the equation, I think, is very telling and I think it puts to rest some of the more enthusiastic commentary which says that the Budget will all be fixed by the movement in the iron ore price. I don't think that's true at all. I do recall, though, that we struck an assumption on a 4-week moving average of $55 Free On Board for iron ore. Now, the Labor Party said that was reckless, they said it was naïve, they said it was dangerous for the Budget and this was all going to bring the Budget down. Well it’s sitting at over $65 now. I think the opposition got drawn into the old fool's game on this by trying to speculate on these issues. These prices will move around and what we've done is take the sober and cautious approach. A year ago in the first MYEFO I brought down, I took a very cautious approach on growth particularly in the out-years. I revised down those projections for growth in those out-years and we continue to take a very conservative and sober view.

BRISSENDEN:

So it is very hard, well it’s impossible isn’t it, to say when you can balance the Budget?

TREASURER:

It will be balanced as I was famously asked in the Parliament not long after coming into the role, when will we achieve a surplus? We will achieve that when expenditure is less than revenue.

BRISSENDEN:

The company tax cuts with the Budget in such a position, can the country afford them?

TREASURER:

This is the issue. We have an earnings problem in this country. Australians, companies, wage earners aren't earning enough and that's why revenue is down. You don't improve people's hours, get them to work more, by taxing businesses more. It's just completely counterintuitive. You don't squeeze the lemon harder, which is what Labor is saying. They look at revenue issues like this and say, ‘we have to tax people more’, ‘we have to tax, tax, tax’. Now, what we say is that we need to grow the economy more, we need businesses to be more profitable, more productive. We need employees to be able to get more hours per week. Where are those hours going to come from if the Government is forcing higher taxes on those businesses? It's the businesses that employ. It's the businesses that provide the hours. And Labor is saying no and even for small businesses, Michael, they're saying a business with a $2.1 million turnover each year should not be classed as a small business, should not pay a lower rate of tax, should not get access to depreciation pooling provisions and cash basis for GST – they should get none of these things.

BRISSENDEN:

Others, the crossbenchers in the Senate are clearly going to support it up to $10 million at this point. It hasn't gone to a vote in the Senate yet. Are you going to put it in before the end of the year?

TREASURER:

No, that won't be coming forward this year. There is a pretty big docket, as you know, over the next two weeks of measures and we'll continue to have that discussion both with the opposition and with the crossbenchers. But even Stephen Koukoulas who is not known as an economist that has talked up the Government, and has certainly been an advisor to previous Labor governments, he made the very important observation last week where he said that with the Trump Administration going forward with their company tax cuts, with the May Administration continuing in the UK to go down the path of reducing their tax rate to below 20 per cent, Australia is going to get left stranded. What do you think is going to happen to the investment capital? We will see a drain of capital then going towards these lower tax jurisdictions and where does that leave revenue then? You have got to remain competitive and you have got to continue to allow your companies to be able to have the earnings that mean that they can pay their staff more, that they can give them more hours and that they can take home more. That's how you lift revenue. You don't squeeze the tax lemon even harder. They'll be getting arthritis they're squeezing this lemon so hard, the Labor Party. They're going to do themselves an injury.

BRISSENDEN:

But, just to be clear, you're not going to resolve this before the end of the year? You’re not going to put this through to a Senate vote, so this will have to wait until next year?

TREASURER:

We'll continue to make the argument because we think the argument is important. Now, the support to take it to the full enterprise tax plan is still not there on the crossbench. I think what these figures show and what the ratings agencies have shown is this Parliament has some important work to do. There is some $19 billion or thereabouts in savings measures that still haven’t passed the Parliament. Now, the ratings agencies and Chris Richardson is saying again today, these measures must pass. Labor is having an argument about a company tax component of this which its entire cost is $4.9 billion over the Budget and Forward estimates and yet they are blocking $19 billion in Budget savings. What they are saying to Australians is if you go to work and earn a wage for a living and work for a company that pays taxes we are going to keep those tax rates higher because we don’t want to cut or get under control welfare spending in this country. So they are making a choice in favour of those who receive welfare income against those who are actually working for an income.

BRISSENDEN:

Chris Richardson also says that the path ahead remains rough for decades. That’s what he said and he says at some point politicians need to be more honest about the need for both spending cuts and tax increases. The Grattan Institute has released a report this morning that finds the Government could save a billion a year by cutting tax breaks for the over 65 for instance. Is that something you would consider?

TREASURER:

The Government already has $15 billion worth of revenue measures which I announced in the last Budget. That includes $6 billion in revenue measures related to our changes in superannuation which I am sure you would agree were not modest changes. This is the most significant change to superannuation taxation that was seen in well over a decade. On top of that there were the retirement income changes in the 15-16 Budget and those changes come into effect on the 1st of January this year. We have already made some big changes in this area, both on the revenue side and on the expenditure side. What we are focussing on to get the Budget back into balance, and the ratings agencies have acknowledged out trajectory on this, then we need those savings to pass and so there is a real test here for the Parliament. It is true that if the savings don’t pass then that puts the Budget, I think, at great risk of the ratings agencies forming the conclusion. Now, Labor are arguing that they think they would have kept the rating by increasing the deficit by $16.5 billion which is what they said at the last election. That number now is even higher, even higher, so Labor has no credibility to say we can protect the rating when by their own admission, their own deficit, and they would abolish the company tax cuts, would still be $16.5 billion worse.

BRISSENDEN:

So, it is still your view that it is a spending problem not a revenue problem?

TREASURER:

It is my view that spending is what we have to get under control because that is what we can do something about. On the revenue side, as I said to you earlier, the goal is to lift what Australians earn because when Australians earn more, they are better off, their living standards are rising and revenues are improved.

BRISSENDEN:

Closing some tax loopholes? Lucrative tax loopholes [inaudible]?

TREASURER:

Multinational tax avoidance, we passed that Bill, not with the Labor Party’s help, the Diverted Profit Tax is coming in, the superannuation changes I have introduced into the Parliament, the excise. Fifteen billion dollars’ worth of revenue measures, I know that won’t always satisfy the high tax club but the high tax club only wants to raise taxes so they can spend more and the Labor Party is in the same boat.

BRISSENDEN:

Ok, Scott Morrison we will leave it there. Thanks so much for joining us.

TREASURER:

Thanks a lot Michael.