29 December 2016
Transcript - #2016194, 2016

Interview with Miranda Devine, 2GB

SUBJECTS: Social services; Turnbull Government’s Enterprise Tax Plan to drive economic growth; infrastructure investment; Election 2016; maintaining Australia’s energy competitiveness.

MIRANDA DEVINE:

On Sunday new pension changes will kick into effect, January 1. Basically these are changes to the asset test but to listen to Labor and the unions and even One Nation, Malcolm Turnbull is stealing food from the mouths of little old ladies. Of course the scare campaign is utter rubbish. What is really happening is that millionaires on the pension might lose a couple of thousand dollars – maybe $5,000. Labor and the unions just forget that we have a huge Budget deficit and cannot afford to give extremely wealthy people a free ride at taxpayer's expense. You can live in a $5 million house and have investments worth over $1.15 million and still collect the pension. That is just unsustainable. So, all that Treasurer Scott Morrison is trying to do is reign in these unreasonable entitlements. He is on the line. Good evening Treasurer and Happy New Year.

TREASURER:

Happy New Year to you and to all of your listeners, Miranda.

DEVINE:

Now, there are a lot of dramas and screaming and whining about these pension changes but didn't Labor support them?

TREASURER:

At the last election they did. The changes that come into effect on 1 January were passed in the 2015-16 Budget. So, they were passed back in June 2015. I was Social Services Minister at the time, Joe Hockey was Treasurer, Tony Abbott was Prime Minister. The Greens supported those measures in the Senate when they were passed and at the last election Labor included all of the savings that were to be achieved from that in what they took to the election and the back-flipped on that one like they back-flipped on the School Kid's Bonus and everything else. We were very upfront about this and for all the reasons that you said this change effectively reverses something that was done back in 2007. So, it wasn't 50 years ago or 30 years ago or even 10 years ago. It was brought in right at the end of 2007.

DEVINE:

When we were in the middle of a mining boom that everyone thought was going to go on forever.

TREASURER:

We were in the mining boom, we had a $20 billion surplus at the time and we had over $40 billion in the bank and it cost the Budget at that time around $1 billion extra a year. Now, regrettably this just can't be afforded.

DEVINE:

Now, you will save $2.5 billion almost.

TREASURER:

We will, well, more than that. That's on the original Budget figures and it is around a billion a year that the saving brings in. You are right to say that previously if you had just under $1.2 million in assets in addition to your family home you could get access to, as a couple, you could get access to a part pension. Now, that will be reduced down to $816,000 for a couple who also own their own home.

DEVINE:

And you are not touching people's homes?

TREASURER:

No, of course not. We appreciate and understand and this wasn't an easy decision to make. When you are faced with an ageing population, let's not forget the pensions that are paid out today are paid for by today's taxpayers – the people who are paying taxes today. Just like those who were paying taxes years before were paying for the pensions that were being paid out previously. In the future, we want to make sure the pension is there for our kids and grandkids and so on. To do that you have got to put it on a sustainable footing and that is what we have done and we are up front about it, Miranda. We took it to a Budget. We put it in a Budget in 2015-16, we passed it through the Parliament and Labor have just been playing the most cynical and pathetic games on this. I can understand people might feel, those who are particularly affected. Now, only 9 per cent of pensioners are affected by this, 91 per cent are either unaffected and there are 170,000 pensioners who will actually be getting an increase of about $30 a fortnight. They are the ones who are on the lowest level of assets and frankly are in most need of that pension payment.

DEVINE:

The pension was intended to be a safety net. It is not an entitlement for wealthy people – is it?

TREASURER:

It's not superannuation. Some comparisons are often made to schemes in Europe and they have a contributory pension scheme. So, people pay extra taxes on the way in over the course of their life so they can receive a pension when they retire. Now, we don't have that system. What we have is a private superannuation system – compulsory. People pay over the course of their working life into that scheme and that is where they draw their superannuation from. Pension payments – which are $40 billion a year, it is the largest part of the welfare Budget – that is paid for straight out of today's taxpayers and it is increasing because we have an ageing population.

DEVINE:

Now, Scott Morrison, you are also getting a lot of flak over the planned corporate tax cuts. You are cutting the rate from 30 per cent to 25 per cent. But Donald Trump's plan to make America great again includes cuts to their corporate tax rate from 35 per cent down to 15 per cent and slashing personal income tax to a top rate of 25 per cent. Ours is 49 per cent, one of the highest in the world. Surely what Donald Trump is going to do is going to actually make Australia poor again because you will see tax refugees leave Australia to go to a much more attractive tax place like America where they can live. I know people with small businesses who plan to go to America buy a house in California – at half the price of a house in Sydney – live there for six months of the year, own their Australian business from their American business and therefore pay 15 per cent tax.

TREASURER:

We can't live in a cave down here in Australia. We have got to have competitive tax rates for all the reasons you have said. Donald Trump clearly gets that. He announced that actually after we put our tax plan in this year's Budget. Of course it was the Cameron Government and now the May Government in the UK and they have already got their tax rates going down to 17 per cent.

DEVINE:

So, do you have any plan to match that?

TREASURER:

Our plan was to reduce it down to 25 per cent and starting this year, this very income tax year, to reduce the tax rate down to 27.5 per cent for businesses with a turnover of up to $10 million. Now, they are not multi-nationals. If you have got a business with a turnover of $10 million or between $2 and $10 million you have got on average about 22 employees. So it is not a big business, it is actually a small business.

DEVINE:

But that will still be almost twice as much as the Trump tax cuts of 15 per cent.

TREASURER:

I don't disagree.

DEVINE:

And what about personal income tax?

TREASURER:

Well, personal income tax, it's very expensive to reduce. This year we actually introduced some income tax cuts – very modest, I should stress, and I didn't say that they were anything more than that. It dealt with some bracket creep at the margin for those on what is the average ordinary full time wage as measured by the Australian Bureau of Statistics, was going to clip over $80,000. That would have put that wage earner in the second top tax bracket and we introduced changes in this year's Budget to push that threshold out to $87,000. Now, I know that is not a lot but I do think it indicates that where the Government can make these changes then we do and we will. On company taxes, the reason we are doing this is because we want to create some headroom in these businesses to invest. Particularly for small and medium sized businesses. I am staggered that the Labor Party, Chris Bowen, the Labor Shadow Treasurer said that it was a Labor thing to do this and everyone from Paul Keating to Bill Shorten and everyone in between on the Labor side previously have supported these sorts of changes. But now they just want to wreck the joint so they just oppose everything and they make it up as they go along to try and create as much trouble for the Government as they possibly can. In so doing they are affecting the Australian economy and they are affecting wage earners going out there and small business people in particular trying to make it all work.

DEVINE:

But aren't our high taxes really damaging the economy?

TREASURER:

Yes.

DEVINE:

And slowing it down?

TREASURER:

Yes.

DEVINE:

And you are only tinkering at the edges?

TREASURER:

We are doing as much as we can in the Budget situation we have. If we were to go further than that then we would not be in a position to be putting the Budget back to balance which is currently projected to 20-21. That wouldn't be achievable with going further than we are going. What we have done is a responsible, affordable, funded cut, to that tax rate to make us competitive and to keep us in that race. It has been blocked once again by Bill Shorten and the Labor Party. He is like that person who stands on the side of the road with the stop-go sign. The only problem is he has always got it on stop.

DEVINE:

Well, I guess that is his job. Now, you have to cut spending, obviously, and you have got to get the Budget into shape. But how do you grow the economy at the same time? Speaking to Barnaby Joyce recently and he coined this term, turning Australia into a low cost energy superpower, by allowing us to utilise fully the resources, the bountiful resources, we have and our advantage, our competitive advantage, that has underpinned our wealth of low cost energy, meaning coal mostly and some gas. So, why are we hampering ourselves and our economy by tying ourselves to these United Nations climate targets, these Paris Accords?

TREASURER:

A couple of things we need to do to ensure that we continue to grow our economy. Let's not forget even at a projected rate, a forecast rate for this year of 2 per cent, that puts us in the top economies in terms of growth in the world today for advanced economies. That said, what we need to continue to do is to invest infrastructure and we are rolling out $50 billion of investments in infrastructure. In my home state here in New South Wales you would have seen recently what we were doing with the Western Sydney Airport development, not just the development of the airport but the roads and undoubtedly the rail will come as well, eventually. Now, that, if the operator doesn't want to take up that option well as Paul Fletcher said the other day we will build it ourselves. We need to get that infrastructure working. There is the inland rail project as well which is another one Barnaby has been pushing really hard and the Government is very supportive of that. So, infrastructure investment is important and that means you have got good debt. Good debt is when you are investing in infrastructure that boosts growth in the economy and gives you a return. Bad debt is what we substantially have now and that is when you are borrowing money to pay welfare payments. That is what cripples the Budget. The other areas of business though, apart from lower corporate taxes and good infrastructure to support them and good innovation and science plans is this issue of affordable energy. And that is important for households as well. What is going on down in South Australia at the moment is a disgrace. State government's job number one – keep the lights on. Well, they are not doing that in South Australia. Whether it is there or the other Labor states which have got 50 per cent renewable energy targets which are absurd.

DEVINE:

And which Bill Shorten has the same policy.

TREASURER:

He does for that and our target is one that was locked into earlier legislation and we have kept it as achievable and modest as we can.

DEVINE:

It is still pretty high.

TREASURER:

Well, if we hadn't legislated it at that level then we would have been subjected to an even higher level because what was cooked up for us by previous governments. Nevertheless, we are endeavouring to be very practical about this for one key reason. We have to make energy an advantage here in Australia. It used to be, for a really long time and the Government, the Prime Minister, myself, Barnaby, Josh Frydenberg, the whole team are working on ways that we can ensure that we can keep our energy costs affordable both for businesses, because it is such a huge part of their cost base, as well as for households.

DEVINE:

Why don't you do what Trump is doing and just tear up the Paris emission targets.

TREASURER:

Well, we are yet to see what ultimately the President-elect will do and we will be watching that with interest in a lot of the things he is proposing. We have got our arrangements in place here in Australia but equally we won't lose a day looking for alternative and better ways to be using the energy advantages that we have in this country.

DEVINE:

Now, were you surprised that you almost lost the election? Or that you won it so slimly by a one seat majority?

TREASURER:

This year my team got up in the NRL. The Sharks, the mighty Sharks, after 50 years and we just won by a couple of points and we still got to hold up the trophy. It doesn't matter whether you win by 2 or 22. It was a very tough election. We haven't had an eight week election in living memory and it was a tough election for incumbents to be re-elected. Just look at what has been happening elsewhere around the world. Incumbent governments are under all sorts of pressure and they have been falling because of how people are feeling, particularly in advanced economies. It has been some years now since the GFC and the world economy remains in a funk and so people are feeling that and they are feeling the effects in many parts of their countries through globalisation, technological change, the sort of energy issues you were raising before, Miranda. In that environment the Government was able to be returned with some pretty strong policies out there. We were just talking about some at the start of this interview. We haven't shirked away from doing these things even in the face of taking them to elections. The fact is whether it was superannuation or pensions or other things we were up front with people. We put our policies out there and we are getting on with it.

DEVINE:

Do you think that part of the problem, and you lost something like a million conservatives who voted for non-Coalition parties, do you think part of the problem was that the leadership changed from Tony Abbott to Malcolm Turnbull? That people felt that regardless of how poorly Tony Abbott had performed that he had been elected and he should have stayed in the job and that the Liberal Party was just going down that Labor track?

TREASURER:

No, I don't think so. I think people are less interested in the politicians and more interested in what has happened to them and what their needs are and what their issues are and they were very concerned about the economy and its direction. Obviously, the scare campaign Labor ran about Medicare took some real [inaudible] in places where there is a high level of reliance…

DEVINE:

But that Medicare scare fell on fertile ground because of the utter mess that the Abbott Government made of that 2014 Budget.

TREASURER:

The 14-15 Budget, obviously it was designed to deal with a very serious Budget challenge.

DEVINE:

And it failed.

TREASURER:

This is, I think, what demands the pragmatism today. We can all go out there and beat our chest and say we are going to do this and do that but in the 45th Parliament you have got to get things passed. We were fortunate just before Christmas to retain the AAA rating because we were upfront with the ratings agencies. We didn't have forecasts in there that were overstating things. They were even accepted by the Labor Party as being very credible. You have got to look at what you actually get done. We get all sorts of suggestions about how we can better save money – and I am open to all of them – but they also have to be able to pass the Parliament. Now, we have a measure at the moment I have been trying to pass now for several years, since I was Social Services Minister, which is the Family Tax Benefit Supplement Payments which are paid at the end of each year. Now, these were developed many, many years ago as a balancing item if people got their income assessment wrong. That's what they were. They weren't supposed to be a special welfare payment and they were introduced for that reason. The technology means we don't need that anymore. So, what we want to do is take those supplements and end them and invest some of that back into a slightly higher fortnightly payment under Family Tax Benefits but mainly to support the Budget repair job and to invest more into affordable childcare. Now, the Labor Party has been blocking that for two and a half years.

DEVINE:

Childcare, this is another, brand new entitlement brought in by a Coalition Government for a Budget that just cannot afford yet another entitlement.

TREASURER:

I suggest differently on childcare. Childcare, today, families, whether they like it or not, both parents typically have to work.

DEVINE:

Let them have their money back in taxes instead of churning it through the childcare system and having ever higher childcare fees.

TREASURER:

The problem with that approach Miranda is that those on higher incomes get more on a churn back to them in taxes if that is the approach. It is those on middle incomes, those earning on household incomes of between $80,000 and $120,000 perhaps, they are the people who need to get access to affordable childcare so they can go to work. If they don't go to work they will be on welfare.

DEVINE:

But the more government money that is put into childcare the higher the childcare fees are.

TREASURER:

Not if you implement the reforms we have been trying to do for the last two and a half years which caps the way the subsidies work. We are very keen to introduce those changes. But, once again, Bill Shorten has got his stop sign out there and he has had it out for over two years on this. We could have more affordable child care very soon if we could just get these savings measures on Family Tax Benefits passed. What we have said plainly to the Parliament is we would love to do these childcare reforms but we won't do them unless we can pay for them and how we pay for them is by abolishing the Family Tax Benefit Part A and B supplement payments which come out at the end of every year. It's like a Christmas welfare bonus in July. If that goes then we can do the other. Now, that is how you run a responsible Budget.

DEVINE:

Now, Malcolm Turnbull as Prime Minister. How is he going? He is not doing very well in the polls. Are you disappointed in him?

TREASURER:

No, not at all. Malcolm has got a firm focus on the challenges we have particularly economically and the national security challenges we have. We haven't skipped a beat certainly on the national security challenges. The economic challenges I couldn't think of someone better experienced and knowledgeable of the economic and financial system both globally and in Australia to be working together with to guide us through this very challenging time. It is a very uncertain world both in terms of the economy and national security and the Government is focused and is very practical. We are about getting things done and by the end of the year we got $22 billion worth of Budget improvement measures passed. We got the ABCC passed, we are bringing back the Australian Building and Construction Commission. Now, we couldn't get that passed through the Parliament for three years and that is going to restore law and order on building sites. We tried and tried and then we took it to a double dissolution election, we were successful at that election and now we have got that bill and the Registered Organisations which says unions have to be subject to the same accountability as companies, after all the business with Craig Thomson and all that dodgy stuff with unions. We have got new laws in place to make unions more accountable. We couldn't get that passed before this election. Then there was the owner truck drivers, you would remember them, and Malcolm was able to drive that change through as well and we got that done before the election too – just in time. Again, that was opposed by the Labor Party. So, look, we have got an enormous amount done but we are not here to blow our trumpet. We are just here to get on with it. I work incredibly closely with Malcolm and he is just focused on, ok we have got that done, let's get on with the next thing.

DEVINE:

It seems that he has evolved, some of his views have evolved or he has become more realistic about the type of Government that he leads.

TREASURER:

Prime Ministers always, if they are successful, govern from the centre and I think that is exactly what he is doing.

DEVINE:

You have been in both the Abbott and the Turnbull Governments are you saying that the Turnbull Government operates better than the Abbott Government did?

TREASURER:

I am very proud to have served under both Prime Ministers. When I worked with Tony I was in immigration and social services, some of those pension changes I mentioned before were ones brought through when Tony was Prime Minister and as Immigration Minister he gave me tremendous support in the work done to stop the boats. Obviously, we developed that up and took it to an election and he gave me full reign to be able to implement that plan and that policy and he gave me great support.

DEVINE:

And that is the greatest success I think that the Coalition has had.

TREASURER:

I think we have had many but that one was one that had really focused people's minds and what we have seen happen since in Europe and other places where it has just demonstrated, I think, the wisdom of that approach. I am very pleased we were able to have achieved that and we have been able to maintain it.

DEVINE:

You are, probably, I would say, the hardest working member of the Government. How are you coping with the stress? I know you were in hospital with a minor ailment recently and I understand you have a dental issue as well?

TREASURER:

Well, this is the time of year where you tidy all this stuff up, Miranda, when you have got a bit of time. I am enjoying time with the family down in The Shire. It is a wonderful place to live and its great seeing my girls and I am cooking them a few curries and listening to a bit of Tina Arena and having a great time with Jen and having a bit of time over the summer like I hope everyone else does. And please be safe out there on the roads and when you are swimming at the beach, stay between the flags, listen to the surf lifesavers and particularly if you are down at some of the coastal stretches which are unpatrolled just be aware of the danger. If you don't know what you are doing, don't go in.

DEVINE:

Yes, that's so true. You deserve a break. You have been working extremely hard, I know, and I hope you do have some time with your kids. I remember talking to Peter Costello about that first, very difficult Budget that he had and he ground his teeth with the stress and lost a crown. So, I hope that is not your problem as well.

TREASURER:

It is a similar ailment.

DEVINE:

Oh dear. I think people should realise how hard you work and really you are doing it in the interest of the nation. So, good luck to you.

TREASURER:

Thank you.

DEVINE:

And I hope the next Budget is successful.

TREASURER:

That is certainly the plan and if we can do that and the Sharks can win back to back premierships I will be a very happy Treasurer.

DEVINE:

There you go. Thank so much, Treasurer.

TREASURER:

Thanks a lot.