20 December 2016
Transcript - #2016192, 2016

Interview with Kim Landers, ABC AM

SUBJECTS: Mid-Year Economic and Fiscal Outlook

KIM LANDERS:

The Treasurer is Scott Morrison and he joins us from our Canberra studio. Treasurer, good morning.

TREASURER:

Good morning, Kim.

LANDERS:

What does this mid-year Budget update do for people who are worried about whether they're going to keep their job; if they'll ever get a pay rise or whether their kids might find work?

TREASURER:

What it shows is the Government's economic plan, our fiscal plan remains on track. The Government continues to ensure that we don't spend more than we save; that we've had net improvements to the Budget from our own decisions of over $2.5 billion. And importantly in this statement we have delivered in full on all of our election commitments: so, particularly out in regional Australia with our jobs packages. If you're getting on that train from the Central Coast, coming down to Sydney: the Wi-Fi program we're putting in there. If you're out in Hazelwood: the transition package that we announced fully funded in this measure, as well as the infrastructure projects all around the country. So, it says the Government's getting on with the job and improving our positions through the decisions that we're taking.

LANDERS:

Budget deficits are going to get worse over the next four years. Economic growth forecasts have been cut. Wages growth is sluggish. So can Australia really afford a tax cut for business?

TREASURER:

We have to do two things. Of course, we've got to get the Budget back to balance: and the projection for that to occur is 2021, on the basis of the estimates that are in this document and the assumptions that are made. But we also have to continue to grow the economy and drive investment. And to drive investment, we believe it's necessary for businesses, particularly small and medium-sized businesses – at least up to $10 million in turnover a year – need that headroom so they can give people more hours, so they can invest in that new equipment and those other purchases that they need to make, to drive their business and to grow it and take it forward. So, there are twin challenges here. You've got to grow the economy and you don't grow the economy by taxing it more and you don't grow the economy by increasing the deficit through your own decisions. Now, we've reduced the deficit through our own decisions by $2.5 billion in this statement alone, after accommodating all of our election commitments. The Labor Party, by contrast, would have increased it by $16.5 billion – and that is after they abolished the company tax cut, particularly for those small businesses and went on a complete spending spree.

LANDERS:

Last time we spoke, you said Labor shouldn't be let off the hook when it comes to passing business tax cuts. So, since then, have you reached out to the Shadow Treasurer, Chris Bowen, asked to have a conversation with him about this?

TREASURER:

We continue to engage with everyone right across the Parliament.

LANDERS:

You've spoken to Mr Bowen?

TREASURER:

All across the Parliament, we continue to reach out.

LANDERS:

Is that a yes?

TREASURER:

Well, I've given my answer.

LANDERS:

So is putting pressure on Labor your only tactic? Your only option?

TREASURER:

No. We're working right across the Parliament to ensure we can secure the passage of the measures that we believe are important for our economy and for balancing the Budget. We're looking for partners in this Parliament. We've found partners over the course of this past six months. In 6.5 sitting weeks we were able to get through more than $22 billion worth of measures that improve the Budget. There remain $13.2 billion worth of measures and that includes $12.5 billion in savings to payments. And that's where we need people to engage with us in the Parliament. And if we're able to achieve that, then we'll be able to achieve the projections that are set out in the MYEFO statement.

LANDERS:

How long are you going to hang onto some of those so-called "zombie measures", such as raising the pension age or making the unemployed wait a month before getting their benefits? Because they're things that Labor, the Greens and some Senate crossbenchers simply refuse to pass.

TREASURER:

Well, I'm just not going to let them off the hook. And again, I don't know why you would either, Kim. I mean, these are important changes that improve the budget position and they get us back to balance. So, I'm not going to give the Parliament a leave pass, Kim.

LANDERS:

But they've sat on the books for several years now and… I mean, how many more years are you going to hang onto them?

TREASURER:

Well, Kim, I'm very persistent and I'm very determined to ensure we get the Budget back into balance. I'm just not simply going to give the Labor Party a leave pass because others want me to do so.

LANDERS:

So you're saying that the Government does have the will to try to find some political compromise to get more Budget repair through the Parliament?

TREASURER:

We have demonstrated that in the last six months and beyond.

LANDERS:

The Government expects to save $7.5 billion in childcare payments over the next four years: almost a $2 billion write-down in carer payments. Why are you expecting a drop in these sorts of payments?

TREASURER:

Well, there are a range of things that have happened, particularly on the childcare payments. If you go back on 2013-14 onwards, there had actually been an upward variation in the cost in what we're expecting in childcare of around about $7.8 billion. Now, there were problems with the model that was forecasting these costs and a lot of work has been done in the last 12 months or so and beyond to fix that. I mean, for example, we've gone from what was being based on just a week's data to a full year's data when it came to usage within the childcare system. The model now breaks things down by the various types of different childcare services. But the other thing I'd mention is the importance of the impact we've had in family day care, where the growth in family day care was previously running at about 37 per cent. Now, that was when there were rorts in the system and we shut those rorts down. And that has been dramatically reduced to remain stable, looking forward over the medium term. So it's about doing the work of improving the estimates that you put into your Budget. So it had gone up previously and the change that has been announced in this MYEFO effectively nets that off.

LANDERS:

The forecast Budget surplus is quite slim: around $1 billion by June 2021. What other Budget savings are you going to have to make to ensure that that holds up?

TREASURER:

Well, we'll be handing down the Budget in May, Kim. And we've handed down the MYEFO statement yesterday and that provides the update to the Budget I handed down this year. And of course, next year's Budget will address the many issues that we will have to address next year. And that work is already begun and we'll continue on that into the New Year and we'll be announcing those measures that are necessary in the next year's Budget. But let me make this point, though, Kim: you talk about a slim projection for that year. I mean, remember: it was Wayne Swan who said he was going to go from over a $40 billion deficit to a $1 billion surplus in the space of 12 months. I mean, the Labor Party made an art form of things that could blow over in the breeze. But what happened instead was a sort of a hurricane from their perspective of their own fiscal mismanagement.

LANDERS:

Were you relieved when the international ratings agencies confirmed Australia's AAA credit rating?

TREASURER:

I wasn't surprised, because not only does Australia's international debt trade well in international markets – which is the ultimate test. I mean, can you get coverage on your debt issuance in the markets? And we're getting three to four time's coverage. Australian bonds are well priced and they're…

LANDERS:

There's still a bit of a cloud hanging over it, though. I mean, Standard & Poor's says that it's pessimistic that a surplus can be reached as you've projected?

TREASURER:

Well, they're entitled to their view. But the Government will frame its policy on what's best for the Australian economy and what's best for the Australian people – to support growth, to support the jobs and the hours that people I know people are looking for. And that's why every single thing we're doing, Kim, is designed to try and drive investment that supports the jobs that people have today and that they want for their kids in the future; and in those regional areas, which are struggling under the transition to ensure, as our election commitments fully funded under MYEFO are doing, are reaching out and trying to help people through those transitions; whether it's up in Townsville – or even today: you know, there are very serious issues at Portland and the Industry Minister, Greg Hunt, is on his way to New York to be able to meet directly there with the Alcoa CEO to work through that issue with our state government colleagues. And so, you know, we're out there trying to make a difference for people who are doing it tough with the transition.

LANDERS:

Ok, Treasurer. Thank you very much for speaking with AM.

TREASURER:

Merry Christmas, Kim.

LANDERS:

And to you too. That is the Treasurer, Scott Morrison.