20 December 2016
Transcript - #2016193, 2016

Interview with Ross Greenwood, 2GB

SUBJECTS: MYEFO

ROSS GREENWOOD:

Treasurer, thanks for your time. Worsening forecasts, pessimistic about the Government's ability to close existing budget deficits, further pressure on the credit rating, that's what Standard & Poor's said today about your Budget update. Is this the wakeup call Australians need?

TREASURER:

Well, there's always a wakeup call, I think, with every set of figures that comes out and the September quarter national accounts, I think, were more than a wakeup call and there's a demand for the Parliament to pass the measures that are necessary to bring the Budget back to balance. Now, I note all three ratings agencies today have kept the AAA where it was before we went into today and that's, of course, welcome but I know they'll keep a watchful eye going forward. But they're not the only ones – those investing in countries all around the world, those investing in Australian bonds will be doing exactly that and sure they'll look at what the ratings agencies say but they're making their own assessments and their own assessment is this and that is they're buying Australian bonds. So you look at what's happening in the marketplace and what investors in the marketplace are doing when they look at what Australia's doing in raising debt is they're saying: Australia's a good place to invest.

GREENWOOD:

But they're saying further pressure on the credit rating, in your mind as Treasurer…

TREASURER:

There's always pressure. There's always pressure.

GREENWOOD:

Is the AAA credit rating lost?

TREASURER:

Well, it's not obviously because they've just affirmed it again today.

GREENWOOD:

Not today but in six months' time.

TREASURER:

They'll make their assessments down the track, as they always will. They said that before and they said they may have done that now and they've chosen not to do that today.

GREENWOOD:

Is it time for our Federal Treasurer to have a 'Paul Keating moment' from 30 years ago and simply tell Australians squarely that if we don't change, we don't get spending cuts, Australia could become a 'banana republic'?

TREASURER:

Well, I said almost exactly that. In fact, I used even Paul Keating's great phrase when I gave my speech earlier this year in September. I said we've had 25 years of consecutive economic growth and I don't want my kids to actually have to experience a recession to learn the lessons of the need for continuing economic reform. Now, I don't wish on that type of outcome and I'm sure you wouldn't and others wouldn't, and there is no need for us to have to wish that on, but the Government has the measures in front of the Parliament and we have the plans to grow the economy and take it forward and do the reforms that are necessary and we need the partners in the Parliament who will work with us to achieve that.

GREENWOOD:

But the problem is that those partners in the Parliament are difficult to achieve the savings that you want. If you can't get the savings, where does Australia end up?

TREASURER:

Well, it means our deficit is higher and that's why the Labor Party says that their deficit will be $16.5 billion higher.

GREENWOOD:

And if that deficit is higher, what happens to us?

TREASURER:

If the deficit is higher, that obviously puts even more pressure on the sorts of issues you raised. Not just on ratings agencies, but it puts more pressure on Australians in the future who will have to pay back higher levels of debt and they'll have to be taxed more. And so, the reason for trying to get the budget back to balance is not some sort of arithmetic exercise, the reason for doing it is to ensure that Australia is resilient as we can be to deal with any shocks that come our way, but even more importantly that in the future, Australians won't have to pay higher taxes to pay for the benefits and other things that have been paid out now – and that's what we're trying to get under control.

GREENWOOD:

But you're telling Australian families, surely, that they have to make sacrifices because they're the ones right now who've got very low wages growth, there's not enough work around the place, bracket creep is killing them and pushing their taxes up – I mean, it's Australian families who are carrying the burden?

TREASURER:

I want Australian families and hard-working Australians going out there every day to be able to earn more. I want them to be able to have more hours and I want them to be in an economy that is growing faster than it is today.

GREENWOOD:

That's what you want, but that's not what's happening.

TREASURER:

And that's why our economic plan – and particularly with the corporate tax cuts, particularly for small and medium sized businesses – which enables them to invest in their businesses to create more hours for those working Australians to get more hours so they can earn more or whether it's our program to support innovation and science in the economy to create those new products and opportunities that boost productivity or it's the export trade deals that is ensuring that in rural and regional areas as well as in our cities, we're seeing expanded trade which boosts incomes or on top of that, even the Defence procurement program which affects the defence supply chain all throughout the country. I mean, everything that we're doing, Ross, is designed to lift growth. To lift growth. Now, the alternative being put by the Labor Party is higher taxes, bigger deficits and bigger debt – that's not a plan.

GREENWOOD:

Ok, $2.1 billion worth of savings over an economy that's worth $1.7 trillion, it's nothing in the whole scheme of things?

TREASURER:

The net impact of policy decisions in this statement is $2.5 billion and that includes the savings that we've made on payments which is – as you rightly say – around $2.1 billion. Now, none of these things are easy to achieve but we have been able to get $22 billion worth of budget improvements through the Parliament in just six and a half weeks of sittings. We've got another $13.2 billion which needs to be passed and we're going to be taking that to Parliament again in the Autumn sittings of next year. And that's really where the rubber hits the road for the Australian Parliament. Do you want to vote for a higher deficit by not supporting these savings which means higher debt and more pressure on working Australian families or are you going to support the Government as a partner in having a stronger economy and getting the budget back to balance?

GREENWOOD:

Tell Australian families what happens – what happens if they don't get these cuts through? What happens to them? What happens to our economy?

TREASURER:

The Australian Government's position will be weaker and –

GREENWOOD:

When you say 'weaker', what do you mean by weaker?

TREASURER:

The Government will have a higher deficit, which means the Australian people will have a higher debt which means they'll be paying higher taxes –

GREENWOOD:

Higher risk of recession?

TREASURER:

Well, they'll have higher taxes. It will impede our ability to grow the economy. It will impede our ability to respond to opportunities that we have. If you're living in regional and rural areas, it will impede our ability to provide the support necessary to help them transition through what is a very difficult time in many of these rural and regional areas. In our major cities, particularly on the east coast and the south east, they're experiencing very positive times as a result of many of the things that are happening.

GREENWOOD:

[inaudible]

TREASURER:

…if they haven't had the same benefit from globalisation and technological change and what's happening in the environment and energy sector, so having a strong Budget is what helps you deal with shocks and difficult circumstances. And after the Labor Party set fire to the Budget when they were last in government, we have been putting out that fire for the last three years, we've got expenditure significantly down in terms of its growth and we're taking the budget back to a position of balance which means we're stronger and when we're in a stronger financial position, we're better able to support services and the support that Australians rely on.

GREENWOOD:

Would you agree right now that Australia's economy is on the cusp and political decisions, one way or the other, could tip it in either direction for better or worse?

TREASURER:

I think that's an overstatement, Ross, we've got to get a bit of perspective. At even two per cent, which is the revised real GDP forecast which is in today's MYEFO, most of the events would see that as an upgrade on their economic forecast – not a downgrade. And, in fact, at two per cent we're still on top of the pack for economic growth around the world. On top of that, we have real evidence that our economy is positively transitioning. Most other economies that suffer a 30 per cent hit to their terms of trade and what we see happen on commodity prices crash land. Now, that has not happened in Australia. On top of that, when you look out over the next few years, world growth is forecast to pick up. Now, it's still modest and we know that wage price indexation is still flat. On top of that, same view on inflation. They're challenging economic times and so, of course, decisions that Governments make to increase debt or reduce debt are always important decisions. Decisions about whether you have a plan, and implement a plan, which is going to grow the economy by supporting business investment or tax it more are, of course, going to have an impact. That's why we think that we shouldn't be taxing it more and we should be doing things with growth.

GREENWOOD:

Do you reckon the Australian public – the voting community – do you reckon they're up for the types of measures and the cuts that might have to be used to maintain this AAA credit rating?

TREASURER:

I can only make that assessment by what happens in the Australian Parliament and in the Australian Parliament we continue to struggle to get the willingness right across the board to make the difficult choices on payment savings that need to be made. Now, we have $13.2 billion still to go, $12.5 billion of those are all on payment savings. Not high taxes or anything like that, it's all on payment savings and they include things, for example, like the Family Tax Benefit Part A and B supplements – a once-a-year payment at the end of the financial year, it's a welfare top-up if you like. Now, what we would like to do is we would like to take that because it was first put in place as a balancing item on people's fortnightly family tax benefit payments. Now, we don't need that balancing item anymore. Technology has ensured that we don't need all those estimations that are made by people, we can do it directly through the tax system and when that kicks in, we can make that change. And we want to take some of that and invest it into more affordable childcare. Now, currently, we can't get that through the Parliament so there is a bit of a wakeup call in every set of numbers and we have to clear the fog of unreality when it comes to what is necessary to do what gets us back into balance. But more importantly, what grows the economy because once you've balanced the budget and reduced debt, you've got to grow the economy. I mean, the Howard-Costello Government didn't reduce the debt by just massive expenditure changes – they did that in the first few years – but beyond that, it was all about the growth in the economy and not spending more than what was coming in. It's pretty simple maths.

GREENWOOD:

Ok, final one. The temporary budget repair levy, is it now permanent?

TREASURER:

No, that comes out at the end of this financial year.

GREENWOOD:

Still comes out?

TREASURER:

Yes.

GREENWOOD:

Despite the state of the budget?

TREASURER:

That's correct. That was the commitment we made. It was going to be there for that period of time and we're not a Government that believes in high taxes.

GREENWOOD:

Treasurer Scott Morrison, appreciate your time.

TREASURER:

Thank you very much.