14 December 2016
Transcript - #2016184, 2016

Doorstop Interview, Sydney

SUBJECTS: Address to the Australasian Finance & Banking Conference; Turnbull Government’s Enterprise Tax Plan to drive economic growth; Productivity Commission study on the Transition of Regional Economies; energy prices; working holiday makers.

[Start of audio]

TREASURER:

These are matters that the banks have to explain to their customers. As I’ve always said, they need to justify what they do in these areas and the Government’s already been taking action to ensure that they make these explanations very clear. The Coleman Committee, the House of Representatives Standing Committee on Economics, I think, conducted a very useful and productive series of hearings and that has produced some very good recommendations which the Government is now working through. I just made mention then of the increase in spread between investor and owner occupied rates, and I think that has been a positive development on the banks’ front. We have seen the rate of investor credit growth slow in the housing market from over 10 per cent to around 5 per cent. I think that has created some cooling in that area which was not overdue so the banks will continue to respond to those issues but where banks decide to charge their customers more than – whether you’re providing mortgages or selling any other product to consumers – you’ve got to be able to justify that to your customers and if your customers don’t want to buy it from that bank then they should go buy it from another one.

QUESTION:

To jump around, given the Government is facing some difficulty in passing its business tax cuts, have you considered launching a round of personal tax cuts to stimulate the economy?

TREASURER:

I’m not going to let the Labor Party off the hook on the Enterprise Tax Plan. The Labor Party should stop their recklessness when it comes to wanting to strand the Australian economy in the global environment. We’ve already seen what the Trump administration plans to bring in, we’ve seen what the May Government has already done and other economies are heading in that direction. Bill Shorten has been supporting company tax cuts up until the point when we actually asked him to vote for them and the same with Chris Bowen. So I would encourage them to reflect, on what is a very reckless position, over the summer and in the New Year work with the Government to ensure that we can encourage investment into this country. So from my perspective, the heat’s on Bill Shorten to stump up the Australian economy and stop being such a pathetic populist.

QUESTION:

You’ve indicated that you want to get bad debt under control before launching into any new heavy infrastructure borrowing, are you unlikely to announce any additional projects until that position is cleared up?

TREASURER:

With great respect, that is an interpretation that has been put into those comments. We already have borrowed to support infrastructure programs now. We already have good debt in our debt portfolio which is supporting those productive investments. My point is, and I think the same point is being made by both the current and the previous Governor of the Bank, and that is that you’ve got to get your bad debt under control. And the way you get your bad debt under control is that you get your spending under control, particularly in the recurrent space, that particularly means by tightening up on your welfare system. Just earlier this week, we were hearing reports of what’s happening with people knocking back jobs and staying on welfare and the loopholes that are there and the Government’s work to be closing all those down. You need to get that recurrent expenditure under control. Effectively what we have is the choice here, Bill Shorten wants to put up taxes, discourage investment because he wants higher welfare bills. He’s saying we should drop the Enterprise Tax Plan which will drive investment in Australia and the cost of that to the Budget, just over the budget and the forward estimates, is a fraction of the savings we’re trying to achieve in welfare which he is resisting. So he’s making a choice. He’s saying, “I want higher welfare payments and lower business investment.” Now, that is a dud decision for the Australian economy and the people who’ll hurt most from that are Australians who go out there and work for a living.

QUESTION:

Why is the Government only now considering a review of regional employment when the mining boom has been winding back for years?

TREASURER:

The Government has been consistently working through areas of friction already and whether it’s what we’ve been doing in Townsville or Whyalla, engagements are even underway in Portland at the moment or with the closure of the Hazelwood plant, we’ve been planning around these things for some time. There are also issues we’ve considered in other parts of the regional economies of Australia. In fact, Senator Nash – Minister Nash, this is her full-time job, as we know and she does it extremely well. So the Government’s always been very conscious of these issues. What I’m seeking to do as Treasurer is to ensure that we have an even better information base on those areas that have been more acutely affected by this transition and it’s not just about the mining investment boom transition, that transition is further exacerbated by issues around globalisation, technological change and environmental changes as well, particularly in the energy sector. So getting an even more defined view about these areas where we need to take a closer look at can only assist. I think it supports the work that Senator Nash is already doing and doing such a great job in and I think that will really assist the Government’s focus. What it says to regional Australians who are feeling left behind is that the Government understands this and we want to understand that problem even better than we do now and to ensure that is informing our policies – particularly as we go into next year’s Budget – about how we can make sure that everybody can come along on this economic transition. Not just those in south eastern capital city states but right across the country.

QUESTION:

[Inaudible] has confirmed that backpackers will pay a third of their wage by January 1st, most of them, what’s your response to that?

TREASURER:

Backpackers will pay 15 per cent tax. That’s what they should pay, at least.

QUESTION:

You mentioned energy, the cost of energy for those hard hit areas of Australia, is that what part of what the Productivity Commission will be looking at?

TREASURER:

It will be looking at all the issues that are impacting the economic transition in these areas and what are the underlying factors. It will be a different combination of factors in different regions and that’s why I’ve asked the Commission to come up with some metrics which better summarise what is going on in each of those places. In one place it may be a combination of the forces that you’re suggesting, in other places it might be in a very intensive resource state and a particular part of that state, whether it is North Queensland or Western Australia, and so they will have then different growth prospects going forward. But the point here is to understand that that’s where the friction is now, what is the sustainable economic base we need to get them to? We don’t want to go out there and rent an economy. We want to go out there and create one for the long-term. And the sorts of subsidies and support we have seen in the past, I think have been about renting an economy. What we want is good economic policies that enable these places to be self-sustaining well into the future and I think that comes with an even better diagnosis of the challenges they have now at the start.

QUESTION:

May I briefly jump back to interest rates? It’s almost Christmas, as Treasurer I’m sure you want everyone to be spending on retail. Is it a bit of a blow that banks are putting up their interests at this time, is it low?

TREASURER:

I never welcome any increase in the cost of living for Australian families. So, I no more welcome a bank’s decision to charge their customers more than I do a rise in energy prices for Australian households and businesses. Whether you’re particularly in South Australia at the moment, you know that issue all too well. That’s why the Government’s policies are working across the board; whether it’s more affordable energy or more affordable housing, stronger investment to drive people’s own earnings capacity so they can get more hours. This is one of the things about the Enterprise Tax Plan, where does the Labor Party think a business is going to get the opportunity to give someone more hours if they pay a higher rate of tax? And what’s their plan? By all means, I think all parliamentarians share a great interest in ensuring our schools are well-funded, our hospitals are well-funded, all of that is true and we’ve got record funding for all of these things under the Government but that funding won’t tell someone running a business – whether it’s here in Sydney or North Queensland or Tasmania or in Bunbury – that here’s your opportunity to give your employees a few more hours a week because we’re going to make you pay less tax. Labor wants them to pay higher taxes. I mean, higher taxes for small and medium sized businesses, they are resisting a tax cut and accessing instant asset write-offs so that they can invest in their businesses for companies with a turnover between $2 million and $10 million. That’s just economic vandalism.

QUESTION:

Back to the 15 per cent you set for the backpackers, as of January that will accrue to 32, no? Is that not right?

TREASURER:

The backpacker tax kicks in at 15 per cent, that’s what it should be at. Obviously the Government pursued other alternatives but Labor played politics with this issue and that issue is now settled and I don’t plan to return to it. Thank you very much.