8 December 2016
Transcript - #2016180, 2016

Interview with Kim Landers, ABC AM

SUBJECTS: September Quarter National Accounts; Turnbull Government’s enterprise tax plan to drive economic growth; maintaining Australia’s energy competitiveness

KIM LANDERS:

The Treasurer is Scott Morrison and he joins me now. Treasurer, good morning.

TREASURER:

Good morning, Kim.

LANDERS:

Are we heading for a recession?

TREASURER:

No, that is not the sort of alarmist thing that people should be leaping to. The market economists have been making that point pretty clearly. There have been some factors around these results and others have commentated on the uncertainty following the election and these sorts of things and the good signs are there, particularly in this quarter and my own discussions with business also indicate that yes they did have a tough quarter in September but things have picked up in the following quarter.

LANDERS:

So, this is just an aberration? A blip?

TREASURER:

I will leave others to say what they believe it is. What I know is we need to ensure that our economic policies are driving investment. This is the key message, not just out of this national accounts but the last 12 national accounts which has shown as the mining investment boom, as we have transitioned out of that, that has obviously had a very big impact on investment in this country. Engineering construction has fallen by more than 50 per cent since the peak of the mining boom. So that has had its effect. But we also saw in these figures some weaker figures on building construction as well. So, the ABCC restoration couldn't have come at a better time. Frankly, it should have come years ago and that is what we were asking for.

LANDERS:

What impact is this going to have on the mid-year Budget update you are due to deliver shortly?

TREASURER:

Nominal growth actually increased by half a per cent in the September quarter and is up 3 per cent through the year. It is nominal growth figures that have the biggest impact on Budget revenues. We have already been taking a fairly conservative approach in the work we have been doing over the last few months going into this MYEFO. You would have seen the work from Chris Richardson a few weeks ago which indicated the impact of lower wages growth and company profits on revenues. They were very astute observations and we have been working along that track. Yesterday's figures, on the real GDP, I said were more than a wake-up call, they were a demand that economic policy focus on things that will help business give people more hours so they can earn more and that companies can earn more as well. That is what our company tax cuts do.

LANDERS:

You describe this negative growth as a bit of a wake-up call and Paul Keating was remembered for saying we had a recession that we had to have.  I am curious to know if a recession could actually help you mount your political case about the reforms that you say are needed for Budget repair?

TREASURER:

I don't wish for a burning platform. I said this some months ago back in late September after the election. I referred to the comments that Paul Keating had made all those years ago. I would certainly hope that it would not be necessary for that sort of terrible result to spur the parliament and others into accepting the important changes that we need. One of those is a lesser tax burden on businesses, particularly small businesses, which is where our tax cuts start so they can give people more hours.

LANDERS:

How do you make that political case for business tax cuts?

TREASURER:

Let's think about the business. Business needs to pay less tax than they are now so they can invest more in their business, give people more hours so they can earn more money in their pockets every week. That is the outcome we need. That is why we need and that is why we need to get it done.

LANDERS:

How do you convince the Senate crossbench that it is urgent and needs to be done...

TREASURER:

What about the Labor Party? The Labor Party used to say that these sorts of changes on company tax cuts were necessary. They argued for them. Chris Bowen wrote books about it. Bill Shorten supported it.

LANDERS:

He also says that the company tax cuts would only contribute to the economy being 1 per cent bigger in 20 years. So, he is not holding it as…

TREASURER:

I don't take growth for granted. I don't know why Chris Bowen does. In this competitive economy you fight for every inch of growth. Just last week they said we had to match backpacker rates to taxation in New Zealand. Today, they think businesses should pay a higher rate of tax in Australia. Labor's argument is a nonsense. What I am focused on is how I get businesses to be able to invest more in their businesses, attract capital for their businesses. That is done through a more competitive tax rate for businesses and it is also done through the program we have on infrastructure investment, where it is everything from what we are doing in Western Sydney on the Western Sydney Airport or what we are doing in Victoria or the Northern Australia Infrastructure Fund, the water investments we are making through the water fund, around the country. All of this is not stimulus – it is investment that gives us competitive advantage that means others want to invest in Australia and that is how we turn this around and that’s our plan.

LANDERS:

How do you get the tax cuts through the parliament though? What’s your plan to get the tax cuts through the Parliament?

TREASURER:

I am making that case right here on your program, Kim. I am appealing to the Labor Party to actually go back to the spirit of Hawke and Keating because they are so far from Hawke and Keating in the Labor Party today. It is not just me that is saying that. Paul Keating said it.

LANDERS:

Will you pick up the phone to the Senate crossbenchers?

TREASURER:

I have already been talking to the crossbenchers about this issue.

LANDERS:

What sort of reception are you getting?

TREASURER:

I will continue to pursue that case but I am not going to let the Labor Party off the hook.

LANDERS:

Anybody who is keen on this?

TREASURER:

I don't know why you want to let the Labor Party off the hook here. I am not going to let the Labor Party off the hook. Chris Bowen and Bill Shorten are on the record for supporting these changes. The only reason they don’t support them now is just pure, cynical, wreck the joint politics.

LANDERS:

Can I ask you about, the big ratings agencies have said they want to see some significant Budget repair. Do you think Australia is going to maintain its AAA credit rating?

TREASURER:

That is a matter for S&P and we continue to engage with them. What I do know is the message they sent after the election, before a government had even been formed, was it was for the parliament to ensure that the savings measures that were necessary to bring the Budget back to balance were actually passed. They said that was the biggest hurdle to Australia retaining the AAA credit rating. I am pleased that at the years end we have been able to progress $21 billion of Budget improvements, that’s more than half what was on the books at the time of the election. That has been a considerable achievement. That includes things that people said we would never get done and would bring down the Government. We were able to get through our superannuation reforms which were very significant tax reforms – very significant. On top of that we were able to achieve the income tax cuts that went through earlier in the year, the ABCC, the Registered Organisations Bill, the changes to VET fee HELP debt and things like that. It has been a very busy legislative year and the Government has been getting a lot done.

LANDERS:

Let me ask you about something that lies ahead. There are reports today that the Chief Scientist is going to recommend an emissions intensity scheme for the electricity market when his preliminary report is given to the COAG leader’s meeting tomorrow. We know the Government has said it is not interested. Why would a Government go against the advice of a chief scientist?

TREASURER:

There is a lot of speculation in that question…

LANDERS:

Wouldn’t he know the best thing to do?

TREASURER:

You are assuming that you know the contents of the report and you are asking me a question about a report that hasn’t been released and asking me to comment on it. So, I think you are engaging in a little bit too much hypothetical there. Let's go back to first principles. The review that was announced by the Government was a housekeeping review that had been part of our position since the 2010 election. What the Government is seeking to do is put in place energy policies that provide energy security for businesses and for households. Electricity prices are now rising at around about 5 per cent...

LANDERS:

All that being the case, the Minister did raise this idea on Monday on this program and he said it would be looked at and now it says that it is going to be ruled out. So how did the Government get itself in such a pickle?

TREASURER:

I think the Prime Minister has been very clear about the fact that by whatever name you want to call it, we are not interested in a carbon tax. The Prime Minister has never been supportive of a carbon tax. Whether it is an ETS or whatever name you want to give it, it is not something the Government is pursuing...

LANDERS:

How come Josh Frydenberg didn't know that then?

TREASURER:

That matter was settled by the Coalition many years ago. What we are interested  in doing is engaging in the engineering of ensuring that our electricity costs, the pressures on those, are reduced and ensuring that we have the sufficient supply, whether it is gas or other important areas that will ensure that energy prices have the cost pressures on them reduced. We have state governments running around with RET targets completely driven by ideology at 50 per cent. We have the Labor Party saying the same thing at the Commonwealth level. We are interested in the outcome which is lower pressures on energy prices for families and households. If you are a business in South Australia, the biggest problem you have got is the Labor Party's RET policy.

LANDERS:

Ok Treasurer, we are out of time. Thank you very much, once again, for speaking with AM.

TREASURER:

Thank you very much, Kim. Good to be with you.