7 December 2017
Transcript - #2017242, 2017

Interview with Jon Faine, ABC Melbourne

SUBJECTS: September Quarter National Accounts; Citizenship; Same-sex marriage

JON FAINE:

I'm delighted to welcome to the program the Treasurer from the Turnbull Coalition Federal Government, Scott Morrison, speaking to us from his offices in Parliament House. Mr Morrison, good morning to you.

TREASURER:

G'day, Jon, very formal but very pleased to be with you.

FAINE:

We're very proper here at the ABC.

TREASURER:

You are.

FAINE:

A surge in business investment, mostly it seems based on government infrastructure expenditure, is matched with no wage growth or next to no wage growth and there are some problems looming on the horizon.

TREASURER:

I'm more positive than that, Jon. What we've seen in here was very strong turnaround in business investment, a very continued strong public final demand – which is public investment in infrastructure, defence industries, these things – that's what has really driven the growth figures which we've gone from 1.9 per cent growth through the year to 2.8 per cent in these figures. Total compensation of employees, which is wages, that's gone up 3 per cent through the year and that has largely been driven by the very strong jobs growth and we've got 1000 jobs being created a day and more than that actually in September.

FAINE:

But not across the board, some states yes and other states no.

TREASURER:

Well, I'll take 1000 jobs being created every day everyday, everyday.

FAINE:

As will I but it's that two-speed economy thing again.

TREASURER:

In the west, of course – we did see an improvement in the west in these numbers which we welcome that. In Western Australia, it was down 3.3 per cent through the year in the last quarter and now it's up to 1.3. Right across, and particularly in Victoria, that was up 4.7 per cent through the year, New South Wales was the strongest of the states in terms of their September quarterly report, but the compensation of employees, the wages figures there, what's pleasing about that is not only have we had these 1000 jobs being created every day but four out of five of those jobs are full-time jobs…

FAINE:

Which is a turnaround as well. Treasurer, the stock market's booming, profits are up, obviously infrastructure and capital expenditure and all the rest of it is suggesting the corporate sector is doing very well. Are you still keen on a company tax cut? Because there seems to be little reason for it.

TREASURER:

The tax cuts we've already delivered for small and medium sized businesses up to $50 million…

FAINE:

No, I'm talking about…

TREASURER:

No, no, I haven't finished.

FAINE:

…your Prime Minister's promise to match Donald Trump's company tax cuts.

TREASURER:

I haven't finished yet, Jon. What I was saying is what we've already seen from the tax changes that we've made is a very strong turnaround in investment – private investment that's up 7.5 per cent – now, two years ago, before we went down this path, it was minus 11 per cent so providing…

FAINE:

Things were crook in Tallarook, there's no doubting it.

TREASURER:

No, things had to be turned around on investment and the way you do that is through the measures that we've been pursuing, not just on public infrastructure but also on tax and that's why we believe we must continue to do that. It's not just the US either, Jon – the UK, France, in particular are taking their tax rates down. In France, they're taking it to 25 and in the UK, they're taking it to 17…

FAINE:

Because they need to. They don't have this economic good news. You do. The corporate sector is clearly doing very well despite what you say is a punitive tax regime, they're still investing to the point…

TREASURER:

Because we're signalling a different tax regime. If you've gone to go and whack up taxes on investment…

FAINE:

They're not investing because of something that might happen years down the track, they're investing because they can get a return right now.

TREASURER:

No, no, Jon. If you're going to go and invest $100 million as a business – you're not thinking about what's going to happen in the next six months…

FAINE:

No.

TREASURER:

You're looking at the next 10 to 20 years.

FAINE:

But you're not thinking about what may have a slim chance of happening depending on how elections go over the next couple of terms either?

TREASURER:

They've already seen us legislate the first tranche of this and we're very committed to the second tranche because it's driving investment. If we hadn't turned the investment story around in this country over the last two years – both on public investment and private investment – then with the weak consumption we saw in yesterday's September quarter figures, then you wouldn't have seen the growth rate jump from 1.9 to 2.8. You would have seen something very different.

FAINE:

The Reserve Bank, the OECD, everybody else except the Liberal National Coalition Government seem to say that the real priorities in the Australian economy would be to improve wages growth rather than company tax cuts.

TREASURER:

These are not mutually exclusive issues, Jon, and in fact, if you allow the companies to continue to invest, which is what they're doing, which is supported by this tax environment, and we have to remain globally competitive, the money goes elsewhere, Jon. If it's not invested here because of uncompetitive tax arrangements, it will be invested somewhere else and the jobs that back-in that investment go with it. So, higher wages will come with more investment and stronger companies.

FAINE:

Are you an advocate for higher wages right now? Are you saying to business, "You have to pay people more"?

TREASURER:

Of course I want to see people paid more based on a more productive economy, based on a stronger economy and that's why we're taking every decision we can to achieve that…

FAINE:

So you're making a submission to the national wage case – whatever it's called these days – your next submission will be 'pay people more'?

TREASURER:

Jon, what we'll be doing is continuing to create the right conditions in the economy for it to perform well we're seeing the labour market already tighten – when you've got 1000 jobs being created every day, that's the strongest jobs growth we have seen in 40 years, we are seeing tightening in the labour market, the Governor of the Bank has already identified that there are sectors of the economy that are getting better wage outcomes now because of the tightness in the labour market. Now, we're going to continue to pursue policies that achieve that which at the end of the day, delivers better wage outcomes for all Australians.

FAINE:

The growth in jobs is principally a lot of it here in Victoria because of government infrastructure spending. In New South Wales, where the federal Government is spending $40 billion plus on infrastructure – I might quickly say in passing – twice as much as it's prepared to commit to Victorian infrastructure. Twice as much in Sydney as Melbourne, it's flabbergasting, I dealt with that with the Infrastructure Minister – your colleague – the other day. I don't want to go down that path again but without governments – state governments – spending money on infrastructure, the Australian economy would be in a very different position and yet, you don't seem – your Government doesn't seem – to recognise the role of state government and infrastructure investment to the extent that it's required.

TREASURER:

That's complete bunkum, Jon. We have got a $75 billion infrastructure program, the overwhelming majority of which has paid for the states to spend on those exact purposes. What is driving investment in this country – private investment and public investment – is two principle things. A more competitive tax environment and a strong commitment to public economic infrastructure development and that is core to the Turnbull Government's plan. The fact that these numbers were strong yesterday was because of that two-pronged approach. Now, on top of that, we've got our trade program – which is opening up markets and we've had a more than 20 per cent increase in agricultural exports over the course of that past year – and on top of that, you've got the defence recapitalisation – the biggest since the Second World War which is one of the reasons why public investment was up 12.6 per cent in the quarter. So, Jon, investment is what the Turnbull Government is all about. Not investing in fluffery but investing in things that actually make a difference to our economy and working with the states to deliver that.

FAINE:

No, you're investing in some of – well, ship building in South Australia to rescue marginal seats in South Australia makes absolute sense…

TREASURER:

Jon, you don't have to be so cynical.

FAINE:

No, sceptical, not cynical.

TREASURER:

No, I think I'll stick with my first assessment, mate.

FAINE:

And we have again and again battles between state and federal governments over who actually gets to call the shots on infrastructure investment. Do you recognise that without infrastructure investment driven principally by state governments, the Australian economy would be in deep doo-doo?

TREASURER:

Jon, I just said that that's why we're investing in it. We have a $75 billion commitment over the next ten years, my answer is in our actions. Of course we do, that's why we're doing it.

FAINE:

As matters stand at the moment, without wages growth, living standards will slip. Correct?

TREASURER:

No.

FAINE:

We have increased household bills, we have increased household indebtedness, we have increased mortgage burdens, the Reserve Bank says the next interest rate movement will be up not down, we have soaring energy costs which are affecting big business, small business and households. We have almost no wages growth, therefore, if people don't have wages growth but they have increased costs then living standards will fall.

TREASURER:

Jon, you've just made a whole bunch of assumptions there. Let me tell you…

FAINE:

Some of them are facts.

TREASURER:

Let me tell you what's happened on the issues you're talking about. On energy, on energy this year and rising energy costs – particularly in the September quarter – I consider was one of the reasons why households were so cautious with their spending in that quarter and household consumption was very flat in the September quarter – well down on previous years, largely because of concerns about the fixed cost of living – your utilities bills, your rent and all of these sorts of things. Now, the National Energy Guarantee is the answer together with what we've done with the retail sector on energy and we're seeing people's bills and they will come down and the modelling provided by the independent…

FAINE:

By what $150?

TREASURER:

No, by $400 actually, Jon. The Energy Security Board's modelling says $400 a year off an average bill of about $1500 a year. So, I think that's a real and meaningful saving to what we're talking about. Let's talk about…

FAINE:

Interest rates are going to go up.

TREASURER:

Hang on, Jon, let me finish the answer. On housing, for example, the measures we've taken on curbing investor lending in the housing market has seen double digit growth in our major cities. In Sydney, it was running at over 15 per cent, it's now running at 5 per cent so we've been able to take the heat out of the investor part of the housing markets and that's suppressing runaway growth in house prices. Now, that's happened in just six months. On top of that, with people getting jobs, we've got also the lowest level of welfare dependency of working age Australians in 25 years – that's people getting full-time jobs and that's why the national wages bill is up because there are more people working so there are other forces which are counter-balancing the other real pressures that are there on the economy. Now, when it comes to interest rates, that's a matter for the independent Reserve Bank but I can tell you, they will not put interest rates up unless the economy is actually driving harder and there are inflation pressures in the economy or there are pressures around employment. For that outcome to occur, that you're talking about, the economy would have to be running even more strongly than it is now. So, it's…

FAINE:

I'm sorry, I remain unconvinced…

TREASURER:

I didn't think I was going to convince you anyway, Jon…

FAINE:

Interest rates are going up…

TREASURER:

No, when are they going up, Jon? Tell me.

FAINE:

I don't know when they're going up but the Reserve Bank says the next movement will be up.

TREASURER:

It won't be going down. I think they've made that pretty clear but it doesn't mean it's going up any time soon.

FAINE:

Households are indebted more than ever, interest rates will eventually be going up, wages growth isn't happening, energy costs are through the roof – therefore, given that our households are not elastic and we don't have a magic pudding, therefore, living standards will decline.

TREASURER:

No, I don't accept that, Jon, and I don't accept you talking down the economy and I don't accept you trying to put fear into the households of Melbourne on a political argument…

FAINE:

No, it's a question to the Treasurer of Australia…

TREASURER:

Yes, which I think I've answered, Jon.

FAINE:

Okay, then let's move on. How can it be fair for the impasse over dual citizenship to be dealt with in a partisan way? The Australian public are calling out for an end, a circuit breaker on this cauterisation of the wound…

TREASURER:

I can't believe you're buying the Labor party argument so easily. Seriously, we had two people…

FAINE:

Whether it's the Labor party's argument or not is irrelevant.

TREASURER:

Jon, you've bought it hook, line and sinker.

FAINE:

No, it's a question to you, Treasurer. How can it resolve something that everyone wants resolved to do it in a partisan way?

TREASURER:

Jon, we've referred our members. We've got two by-elections. One's been held and there's another in a fortnight. We've done that. We've done it. Bill Shorten was the one who said he had a rolled gold system and no one was under a cloud…

FAINE:

And he is embarrassed and quite rightly about that…

TREASURER:

He didn't refer anyone at all.

FAINE:

And he's quite right to be embarrassed about it and we will all judge them accordingly but likewise, we would like to see a clearing of all the ambiguities on both sides so this doesn't roll on into 2018.

TREASURER:

What are the ambiguities on the Coalition side?

FAINE:

Well, there's a number of people, I've got the list. I'm sure you know a bit better than me and there are people that are saying, for instance, "I have legal advice saying I'm okay." Well, that's not good enough. The Labor party have to produce more than legal advice – actual documentation – that applies to your side as well.

TREASURER:

No, Jon, you misunderstand the issue. What we're dealing with, with those particular Labor members is their own stated facts – their own stated facts. It's not about legal opinion, they have admitted what their status was at the time of nominations. They've made that clear. The High Court has already made some rulings. Now, take John Alexander. John Alexander didn't even wait to be referred, he just resigned and did the honourable thing and said, "I'll go to a by-election".

FAINE:

As did the Greens, as did Scott Ludlam and Larrissa Waters…

TREASURER:

Well, that was in the Senate, it's a bit more serious when you're talking about the House of Representatives.

FAINE:

It would be wrong if you and I were needing to even still discuss this next year, wouldn't it? In which case the only way to resolve it is for any ambiguities to be settled for once and for all.

TREASURER:

The Government has acted completely in accordance with that principle, we're just simply asking the Labor party to sign up to the same standard we've already demonstrated.

FAINE:

Will the same-sex marriage law go through today?

TREASURER:

Yes.

FAINE:

Are you pleased about that in the end?

TREASURER:

You know I voted no but I'm not going to frustrate its passage.

FAINE:

So are you pleased that it will be done and dusted, it will be settled?

TREASURER:

I voted no in the survey but I respect the opinion of the Australian people.

FAINE:

And once it is law, if someone was to invite Scott Morrison to a same-sex marriage, would he attend?

TREASURER:

If they were a friend, I would.

FAINE:

Do you have friends who may be having same-sex marriages?

TREASURER:

None that I'm aware of. So if they are then I would always be happy to be there and supporting a family or friend.

FAINE:

Thank you indeed for your time on all of those issues and the best for Christmas and the holiday season. Thank you for all the times you've joined us in the course of the year.

TREASURER:

No worries, Jon, talk to you next time.