2 December 2016
Transcript - #2016175, 2016

Interview with Tom Connell, Sky News

SUBJECTS: Working Holiday Maker tax arrangements delivered through the Parliament; Bill Shorten and Labor’s wrecking approach to policy; Mid-Year Economic and Fiscal Outlook

TOM CONNELL:

We’re joined by the Treasurer, Scott Morrison, fresh from what was eventually a win for you yesterday on this backpacker tax. Can I ask you, yesterday morning you really put a line in the sand saying that you wouldn’t go lower than fifteen, did you know at the time that this deal with the Greens was on the cards?

TREASURER:

Later that morning the Greens approached Senator Cormann and that was well after the position we’d made clear that morning. I communicated a similar position to Senator Hinch the previous night regarding the 15 per cent. That’s where the Government reasonably thought the tax rate should be set for the reasons I outlined. That was the seasonal worker rate. We weren’t going to get into this sort of legislative ping pong between the Senate and the House and that was our position. The Greens approached us on this matter. We were able to then, after some discussions around a couple of points, come to a position including a $100 million investment in Landcare. Landcare is a very successful organisation. It’s well supported right across the country and in rural areas and we think it’s a good investment. Now that will be completely dealt with and covered off in the MYEFO statement as is the usual practice. But the package also delivered $560 million net to the budget, which is just over 70 per cent – 74 per cent – of the original measure and in the 45th Parliament, I’ll take that.

TOM CONNELL:

Yeah, it’s not always easy in that Senate. That’s certainly self-evident. The Landcare saving in MYEFO or the offset, is it going to be within environment? Is there going to be an offset within that portfolio?

TREASURER:

All of those matters will be made clear at MYEFO. That’s what I’ve said so that statement comes out on 19 December. The $100 million is a four year fixed investment. It’s not an ongoing investment. It’s four years. The backpacker tax is at fifteen per cent which is an ongoing measure and so I think that’s the real issue here. But we’re pleased to make that investment. It is a good investment. We are strong supporters of Landcare and I would have thought the Labor Party were strong supporters of Landcare – maybe they are but they were very critical of this yesterday. They were prepared to go to ten and a half and have all of that just go in a lower tax rate for backpackers. This is a much better way, I think, of having a good investment. We’ll be able to fully address that so that there will not be an impairment to the bottom line of the budget. But most importantly also, $21 billion now has passed through the Parliament of our budget measures so I can go to the ratings agencies once again and say we’re getting on with the job. Despite the odd frustration here and there, we’re making it happen.

TOM CONNELL:

Just a quickly on Landcare though, because obviously the Greens have environmental concerns – they would say that this is a win. So is it not going to be offset within the environment portfolio, that spending?

TREASURER:

Well, the MYEFO comes out on 19 December, Tom. You’ll have to wait until then.

TOM CONNELL:

Ok. Malcolm Turnbull yesterday was talking a lot about rich white kids not wanting to drop their tax rate further. When you look at this package, obviously yes, the tax rate is fifteen rather than thirteen but instead of taking 95 per cent of their superannuation, it’s going to be 65.

TREASURER:

Correct.

TOM CONNELL:

That seems to be about the same net position when you factor in superannuation tax and income tax.

TREASURER:

What matters is for farmers, in particular, is having a consistent rate for seasonal workers and backpackers. The thirteen per cent figure was completely arbitrary and was just the product of rather cynical politics and that’s the point I made yesterday morning. Now that’s no way to set your tax system, with some sort of tax auction that was going on. Fifteen per cent was the figure that was linked to the seasonal rate. The nineteen per cent figure had left us in a no-worse-off position for backpackers in terms of what was in their pocket to achieve international competitiveness. We moved from nineteen to fifteen in the spirit of compromise, but compromise isn’t a free-for-all. Compromise is not without limits. It has to be common sense, it has to be reasonable. We made a very clear position and that was the position that was ultimately agreed.

TOM CONNELL:

But just on that situation, you agree in a net sense of taking in both taxes, superannuation and income tax, it appears to be about the same situation for these backpackers.

TREASURER:

One of the things that we’re going to be doing also is that we’re going to be working to see how we can enable backpackers to be able to claim back and put cash in their pocket from their superannuation that they earn while they’re in Australia. One of the problems with the superannuation side is that it doesn’t get spent until they get home. Now, we want them to spend it here so we’ll also be working on that next year to see if we can free that up so more of that that they’ve earnt here can be spent here in Australia.

TOM CONNELL:

I’m sure tourism will welcome that but just finding that point again, it’s about the same net position, is it not? If you factor in both taxes for backpackers, the fifteen –

TREASURER:

If you take into account the superannuation which is a different measure, what we’re talking about is the headline rate at fifteen per cent, which is the same as the seasonal rate and having a consistency in those rates was very important. We think that that was the right way to go. Now we’ve made an offset with the arrangement with the Greens to reduce from 95 down to 65 on the Departing Australia Superannuation Payment provision and this was the nature of the arrangement we were able to reach agreement on yesterday.

TOM CONNELL:

Now, Derryn Hinch told us earlier this week that on Sunday at the Lodge you told him that there was this possibility of moving to fifteen per cent…

TREASURER:

He suggested to me we would be moving to fifteen, and my position on Sunday night was that that was a cost of $120 million and the Government, at that point, we thought that that was too big a cost.

TOM CONNELL:

So at that stage, it was a flat-out no?

TREASURER:

At that stage, we weren’t moving to fifteen per cent. I had also seen Senator Hanson that night and she had again conveyed to me her view about fifteen per cent and the Government had taken no position on moving to fifteen per cent that evening, so I answered Derryn’s question honestly.

TOM CONNELL:

So it was a flat-out no at that stage, because Mathias Cormann was on Sunday saying that you simply wouldn’t budge from nineteen per cent.

TREASURER:

He said it again, I think, that evening, and that was the Government’s position at that time.

TOM CONNELL:

So at that stage, it was a firm flat no to Derryn Hinch?

TREASURER:

It was at nineteen and I said that’s the cost and that is a very significant cost. I mean, it was a very quick, passing, casual conversation. It wasn’t exactly a sit-down UNESCO conference.

TOM CONNELL:

Yeah. Just finally, you’ve spoken a bit about MYEFO. It’s quite late in December. There’s been a bit of contradictory sort of commentary about some better prices in resources but lower tax receipts. Should we expect a good or a bad Christmas present at that stage?

TREASURER:

Well, we’ve still got to wait for the second quarter national accounts data that comes down next week. That’s an important set of data when you’re framing the MYEFO. There’s also some tax collection wash data that will come through shortly as well. And that will give us a much better understanding of where revenues is sitting and Chris Richardson made that point a few weeks ago…

TOM CONNELL:

Could still go either way really?

TREASURER:

But I don’t think people should be expecting movements in commodity prices to be offsetting the sorts of impacts that Chris Richardson highlighted. But the final position on that we won’t know still until this other data comes in.

TOM CONNELL:

But the scalpel might have to come out to a small extent?

TREASURER:

Well the MYEFO is an update, not a mini-budget. It’s simply just updating the parameters and where there are measures that have to be offset and dealt with between the Budget and MYEFO, that’s exactly what we do. So on 19 December, we’ll make that all very clear.

TOM CONNELL:

We’ll have to wait a bit longer but a busy week and year. Thanks for your time, Treasurer Scott Morrison.

TREASURER:

Thanks very much, Tom. Good to be with you.