7 December 2016
Transcript - #2016179, 2016

Interview with David Speers, Sky News

SUBJECTS: September Quarter National Accounts; maintaining Australia's energy competitiveness

DAVID SPEERS:

Treasurer, thank you very much for your time. This number today was not what was expected. Can you tell me, what was your honest reaction when you saw -0.5?

TREASURER:

Well, you never like to see a negative figure on something like this and it was, I think, as the markets have said, at the negative end of what their spectrum was. I think what the markets have seen also though is that underlying, what is driving this, has been known for some time. Every National Accounts I have reported on it. I have been highlighting the issue of business investment at every G20 meeting and the Budget which I prepared earlier this year, it was all about trying to deal with this issue of business investment.

SPEERS:

So, why is nothing happening today on this? You have talked about this and when you and Malcolm Turnbull took your respective jobs we were promised new economic leadership.

TREASURER:

Turning around business investment on the transition phase from the mining investment boom is no easy task and we are still seeing the wash out of the mining investment boom. Those numbers we are still seeing coming through now. That hasn't concluded. Engineering construction has fallen by more than 50 per cent since the peak of the mining boom. That hits your business investment numbers. One of the encouraging things that we saw in today's numbers, the rise in imports and the inventory numbers that we saw today can provide a bit of an indication which says that they are building up some stocks there. Other equipment coming in, farm machinery, particularly I understand, which then leads into that transitioning into the business investment numbers.

SPEERS:

So, you see some signs that we will get a bigger figure, a positive figure, in the next quarter?

TREASURER:

We certainly hope so but it needs more and that is why we need the Enterprise Tax Plan. That is why you need to put in place the measures which free business up to…

SPEERS:

But Labor is saying you should take the blame for this, this is only the fourth quarter of negative growth we have had in 25 years and there were reasons why we had those other ones; whether it was GST coming in, whether it was the Global Financial Crisis – what is to blame for a negative quarter today?

TREASURER:

Well, Labor is always quick to rush to judgment on these issues. I will let them engage in the politics…

SPEERS:

Do you take responsibility?

TREASURER:

What we take responsibility for is the plan we put forward to turn this around and we will continue to prosecute that plan and we are calling for partners in the Parliament to support it. Now, the Coalition has done this in the past David. The Coalition has supported, from opposition, governments in the past that put in place important economic reforms and we remain as true to that as back in the 1980s and the 1990s and when we are in Government and the Party that has moved away from that is Bill Shorten's Labor Party.

SPEERS:

You have been, the Coalition has been in office, three years – you have been Treasurer for a year. Do you accept responsibility for this negative figure?

TREASURER:

I accept responsibility for the Government's economic policies and the economic policies are designed to turn this situation around. That is what I take responsibility for doing and to achieve that I need the constructive support of the Parliament. I need the constructive support of willing partners who want to set up the next 25 years of economic growth. Rather than what we currently have with the opposition which is a team of wreckers.

SPEERS:

But will your plan, this company tax cut plan, deliver growth? Your own figures show we are looking at only a one per cent improvement growth and that is after 20 years.

TREASURER:

What our plan will do, which is not just the Enterprise Tax Plan, it's the Defence industry plan, it is what we are doing in innovation, it is what we are doing to support start-up companies and to change insolvency laws and to create new regimes which support other forms of financing in the economy…

SPEERS:

But the company tax plan…

TREASURER:

What we are doing with export trade deals – all of this is part of the plan. To say it is just the Enterprise Tax Plan I think would be to oversimplify the policies.

SPEERS:

But the Enterprise Tax Plan is what you need Parliament's support for. That is the sticking point here. You are saying…

TREASURER:

We actually need support for a number of these other things. We tried to introduce crowd sourced equity funding the other day into the Parliament and the Labor Party even opposed that. So, look, the Enterprise Tax Plan is consistent with what is happening in the United States, what is happening in the United Kingdom and if we don't move forward on this we will be left stranded. Now we are committed to it. The Labor Party used to be committed to those things, so what has happened and what is their alternative? I think investing in schools is a great idea but that is not about to get a business to invest in new equipment the next quarter, the quarter after that or the quarter after that. That has its merits in another context. But if the issue is, and it is, driving business investment as we come out of this transition in a tough and competitive global economy then you need things like our tax plan. Our infrastructure plan is critical to this as well. It is not about stimulus, not about splashing cash, it is about creating infrastructure. We are investing in the nbn. I am not aware of the Labor Party proposing to invest more in the nbn. We are investing in infrastructure – Inland Rail, Western Sydney Airport, the big package of roads we announced in Victoria and other places. We are pleased to see what is happening with Adani in North Queensland, the Northern Australia Infrastructure Fund. We are investing in infrastructure.

SPEERS:

Ok. But the company tax cuts, it looks like the numbers are there in the Parliament to get through part of it – for businesses with turnovers of up to $10 million. I know we have talked about this before, whether you take that and run with it and then work on the rest later, is there a growth dividend from even that much of the company tax cut?

TREASURER:

Well all of that is worth doing.

SPEERS:

What's the growth dividend?

TREASURER:

Well, all of it is worth doing. The growth dividend principally comes from that but it also comes from businesses being able to see a ten year plan which means they end up being able to earn more from their investments because of our tax cut…

SPEERS:

How much growth will we get out of the tax cut?

TREASURER:

The Enterprise Tax Plan, those figure were in the Budget and it is around about..

SPEERS:

That was the one per cent figure over 20 years. What if you only get cuts for businesses up to $10 million?

TREASURER:

David that is what you are suggesting perhaps we should be doing or others are suggesting. I am not suggesting we do that…

SPEERS:

Or Nick Xenophon for example, that is what he is suggesting.

TREASURER:

Then he should run his numbers on that. My numbers are based on implementing the whole plan because I think it's the whole plan we have to implement. That's why we put forward the whole plan. We didn't just put forward 'oh let's do it to $10 million'. We said let's do it across the economy as the UK, US and NZ have done. If we want to be left behind, if we want to see capital flight back to those economies or to those economies, then by all means follow the Labor plan.

SPEERS:

Will these figures worry the credit ratings agencies?

TREASURER:

I think that is a bit premature. This is one quarter and as market commentators have already said today, there was a great deal of uncertainty around the back end of June and in July and in August. So there were a lot of factors playing around this quarter that were focussed on today and their estimates, even the Reserve Bank were saying yesterday, they expected some slowing down before pick up. So I don't think anyone is leaping to those conclusions David. I don't think [inaudible] either.

SPEERS:

No, and we shouldn't get too worried about the budget bottom line here either?

TREASURER:

Well nominal growth is the one that drives the revenue estimate and the nominal growth at 3 per cent and the half a percent increase we had in the quarter is a good thing. The incomes growth picked up again, another quarter for the terms of trade. On top of that the standard of living measure which we also saw with household income per capita, that also was picking up. That is a welcome sign. Compensation of employees going up – that is hours and that is jobs. Hours and jobs. That is what people want and that has come through in those figures. On top of that, the private sector gross operating surplus, that's profits – that is also up again. So they are earning more, that's a good sign.

SPEERS:

A final question if I can just on climate change. We heard the Prime Minister and others say today you are not going to do any sort of price on carbon, even an energy intensity scheme. What is the policy argument for not doing that?

TREASURER:

What we are seeking to put in place, and this is a big challenge for the Australian economy, is to deliver energy security and reduce the pressure on rising energy prices. Now electricity prices are growing at around five per cent now and we have some rather ridiculous RETs that exist in the states of up to 50 per cent. And the Labor Party want to go to the ridiculous levels of RETs and emissions reduction targets. They are completely irresponsible targets driven by ideology, not economics. Our plan is to deliver energy security that ensures we transition through this phase…

SPEERS:

But this Energy Intensity Scheme, a lot of experts say that is the cheapest way to do it.

TREASURER:

They are welcome to those views. We will continue to work this problem and work it to solution which means taking pressure off those energy prices.

SPEERS:

Ok [inaudible] that it's a bad idea? Who are you relying on here or is this just politics?

TREASURER:

No it's not just politics David. We have made our position on things like carbon taxes and the ETS crystal clear. I know there is a lot of interest in wanting to revisit the colourful nature of that debate of some years ago. The Coalition has no interest in revisiting that colourful debate. That debate is settled within the Coalition but what we are committed to is reducing the pressure on energy prices for households and for businesses.

SPEERS:

You will have to spend more on the Direct Action Plan then?

TREASURER:

As I said to you today, we will take these issues one step at a time. But if you go to South Australia and you ask them what is the number one issue which is driving your business into the ground, they will say the South Australian Government's policy on energy prices and the RET.

SPEERS:

Treasurer Scott Morrison, we will have to leave it there, appreciate your time.

TREASURER:

Thanks David, good to be with you.