20 December 2016
Transcript - #2016191, 2016

Interview with Leigh Sales, ABC 7.30

SUBJECTS: Mid-Year Economic and Fiscal Outlook.

LEIGH SALES:

And joining me now from Canberra is the Treasurer, Scott Morrison. Thank you very much for joining us today.

TREASURER:

G'day, Leigh.

SALES:

Of the numbers that are projected over the next four years, life for many Australians is going to get harder isn't it? It's going to be harder to get a pay rise, harder to get a full-time job. It's going to be harder to get elective surgery in a public hospital. You're not going to get more money for your local state school?

TREASURER:

Well Leigh I think in the post GFC world, low wages growth, low inflation, low rates – these have become new norms in this economy. And that is a difficult space for our economy to be continuing to perform well in. Despite all of those challenges, the fact that we're talking about expecting real growth in our economy this year of 2 per cent. I mean, that puts us in the top of the pack of advanced economies around the world. And in most other economies a 2 per cent figure for real economy growth would actually be an upgrade to their forecasts, not a downgrade.

SALES:

That's still less than what we anticipated, though?

TREASURER:

Well of course it is. That's why it's called a revision downwards at 2 per cent. And that comes off particularly the back of what we saw in the September quarter national accounts just the other week. But at 2 per cent growth, and when we're seeing the real evidence of how our economy is successfully transitioning off a 30 per cent fall in the terms of trade. I mean, there are good things happening in our economy but there are good things that have to keep happening and one of the important things we need to see in the economy going forward is increased investment. That's what's going to support the jobs, the extra hours going forward, and that's what the Government's economic plan for everything from the work we're doing – innovation and science, through to what we're doing on the enterprise tax plan or the export trade investments or even our 20 year defence procurement.

SALES:

Let's talk about that in a bit more detail because you've been talking about economic growth and that is what you're banking on here to return the Budget to balance. You've recorded a negative quarter of economic growth. As you've pointed out the annual figure has been downgraded to 2 per cent. What do you imagine are going to be the short-term drivers of growth that you needed yesterday really?

TREASURER:

It's a very good question because it goes to what are the things you can do right now to support businesses to invest more in their businesses, to give employees more hours and that's exactly what our enterprise tax plan is seeking to do. And particularly for small to medium sized businesses we have a measure in the Budget which would see the threshold for small business to be defined as a business up to $10 million in annual turnover and they would have a lower tax rate, they would be able to instantly write-off investments in new equipment of up to $20,000. They would have access to pool depreciation provisions, all things that help them invest more in their business. We need that passed. The Opposition opposes it.

SALES:

But the problem is you've pointed at that as a short-term driver of economic growth. It hasn't passed. So it's currently not a driver of economic growth?

TREASURER:

A very good reason for the Opposition to support it and the Parliament to support it because that's the sort of thing you need. In the absence of that Leigh, I mean of course we have got our investment in infrastructure which is a $50 billion program which continues to roll out, which sees major initiatives rights across the country. In today's statement there were further announcements along those lines. On top of that there was the funding of all of the election commitments. So the regional jobs plans, the investment packages in places like Townsville. There was the arrangements for the package of transitional support in Hazelwood. All of these things fully funded and not just funded. But we've got a $2.5 billion improvement to the Budget by doing what we've done in this statement. And that compares to a $16.5 billion deficit that the Labor Party would add to these numbers if they were handing down the statement today.

SALES:

Let's stick what you're doing.

TREASURER:

Sure.

SALES:

One more point on the company tax cuts you're keen to see get through. Existing receipts from company tax are lower than anticipated. If your lower company tax rates gets through then you're going to get even less revenue from company tax, so you're going to take a definite short to medium term hit in revenue in the uncertain hope of some future economic growth that can't be quite measured?

TREASURER:

This is the dual challenge the Government has to bring the Budget back towards balance. And to do that, the measures we've outlined – a $2.5 billion improvement, we always do not spend more than we save and we've continued that in this statement today. But at the same time you have got to grow the economy and do things that boost investment because that is what will ultimately bring down debt over the longer term. So you've got to work down both tracks. That's what this statement reflects again today by continuing to roll out our plan for jobs and growth which is delivering across regional Australia as well as in the cities. But also getting us on the path to balance...

SALES:

If I can get you to address that – my point on the growth though is you're going to take a short-term hit to revenue when you're already taking a hit on revenue?

TREASURER:

That's already factored in to the Budget and the Forward Estimates. With that factored in we still have a $2.5 billion improvement in the Budget bottom line on the decisions we're taking. The Labor Party says they'll abolish that but at the same time they're saying, even after they've abolished it they will have a worse deficit to the tune of $16.5 billion. So our plan's funded. It has demonstrated today in this statement that it is funded and we think we should be providing that incentive for small and medium-sized businesses to invest and invest now. They’re are between $2 - $10 million in turnover Leigh, there are 100,000 companies in this country and they employ 2.2 million Australians. I want to give them that boost now.

SALES:

On the broader economic measures. Let's take the Coalition's first Budget as our baseline. Joe Hockey in that Budget in 2014 predicted that by next year the Budget deficit would be $2.8 billion. Today the Budget deficit for next year is predicted to be $28.7 billion. That's the result of two years of economic management by the Coalition?

TREASURER:

The difference between those two numbers is what has happened to revenue over those period of times and in fact expenditure is actually less.

SALES:

The Coalition never accepted that excuse from Wayne Swan when he was Treasurer. It was all about Labor's economic management.

TREASURER:

That's because when the Labor Party were doing their forward projections they would do things like assume 2 per cent growth only in expenditure off into the never, never and they would turn a $44 billion deficit into a $1 billion surplus in the space of one year it was clearly nonsense… Now, in the figures I've outlined today Leigh, let me finish. The figures I've outlined today have very cautious conservative forecasts based on assumptions about commodity prices which even the Labor Party have reluctantly agreed to today. So, this is a very measured document we put out today. And I can't speak for Wayne Swan's Budget. I mean he said he was delivering four surpluses. They never turned up.

SALES:

No but it seems that you apply a different standard for the reasons that some of the numbers change or go backwards. You apply a different standard to Labor than what you apply to yourself?

TREASURER:

Not at all Leigh. I just explained that point. That's your commentary, that's not my commentary. What I'm saying is, when Labor put their forecasts together for revenue and when they put their forecasts together for expenditure they made unrealistic assumptions about expenditure growth. They said that the Labor Party would only increase expenditure by 2 per cent in real terms over the medium term. What they were achieving under the life of their own budgets was real growth in expenditure of over 4 per cent.

SALES:

One tool that any Treasurer wants to have in his or her toolbox is the ability to increase or decrease Government spending to either cool down the economy or to stimulate it. Isn't it a problem that because you've made stimulus such a dirty political word, you've boxed yourself into a corner when it comes to policy options?

TREASURER:

No I disagree with that. Because the sort of stimulus that I won't engage in is handing out cheques to 16,000 deceased people, setting fire to peoples' roofs and overpriced school halls. That stimulus I think has been discredited and rightly so…

SALES:

Stimulus is OK, though, as a principle, isn't it?

TREASURER:

It was overinflated and didn't get the job done…

SALES:

Do you accept that stimulus is ok as a principle?

TREASURER:

What we are focussed on Leigh, is focusing on investments in infrastructure that boost productive capability.

SALES:

And that is economic stimulus, right?

TREASURER:

There are two different issues here. If you're looking for stimulus, fiscal stimulus, you're wanting to inject cash into the economy through any which way you can. Now, what I'm a fan of is investing in an economy to boost its productive capacity. And I don't think handing out cheques to dead people is a good way to do that.

SALES:

But stimulus is something that you consider to be a useful policy option?

TREASURER:

I think investment in infrastructure that boosts…

SALES:

That's stimulus.

TREASURER:

Leigh, you use the words you want to use. I'll use the words I want to use. An investment in infrastructure that boosts our capability. The projects have to be right, they have to deliver long term gains. You just don't throw the cash out the door at anyone asking to build something. You invest it in things that make a difference and that's what this Government is doing.

SALES:

Scott Morrison, we're out of time. You are very regularly on this program and we thank you for that. All the best for Christmas thank you.

TREASURER:

Merry Christmas, Leigh.