21 December 2017
Transcript - #2017256, 2017

Press conference, Sydney

SUBJECTS: Bill Shorten puts Aussie jobs and wages at risk as United States slashes company tax; consumer watchdog to put petrol companies on notice

TREASURER:

Merry Christmas. The Trump tax cuts are here. The question is: will Bill Shorten and Labor allow those Trump tax cuts to take Australian jobs, Australian investment and Australian business with them? While this is excellent news, of course, for the United States' economy, whether it's good news for the Australian economy will depend on whether Australia is able to move forward and legislate our Enterprise Tax Plan to ensure that Australian tax rates for business can remain competitive in an increasingly competitive world.

Advice from Treasury, based on work that has been done by the IMF, has concluded that the IMF analysis suggested that if distributed evenly, that is outflows of capital, will reduce Australia's GDP by 1 per cent over the next decade versus the counterfactual, which is us doing nothing. It says, by effect doing nothing and remaining at 30 per cent, Australia's GDP could be 1 per cent worse off according to the IMF but by contrast were Australia to implement the Government's Enterprise Tax Plan this would in fact negate these impacts and at least ensure that Australia was left no worse off. If Australia implements policy changes to offset those of other countries, Australia can maintain investment and gross domestic product.

It also notes that Australia is increasingly vulnerable to what are major step changes in the global tax environment, such as the US plan – at that stage a 15 per cent company tax rate reduction. This could exacerbate existing concerns regarding the sustainability of the Australian tax base and they would need to consider medium term tax receipt projections once the full parameters of the US proposal were clearer. The chart that I have here demonstrates what is happening. The US are going from the highest rate of corporate tax in the OECD right back into the middle of the pack. Australia has the opportunity to do the same with the plan that we have before the Australian Parliament and that has been steadfastly resisted by the Labor party. To jump from where we are here, to also take us into the middle of the pack.

We also need to understand that France is moving to 25 per cent. The UK is already well down – well down – in terms of their corporate tax rates. We even now have Japan considering what they might do with their tax rates. Before the German election Wolfgang Schäuble one of the most experienced finance Ministers in the world was saying that Germany itself would have to act at some point to ensure they remain competitive.

This was no surprise to the Turnbull Government in terms of what was happening with the competitiveness of tax rates around the world for investment. Before the last election we put in our 16-17 Budget an Enterprise Tax Plan that would ensure, as you can see from the chart, that Australia would remain competitive. We put it in our Budget. We took it to an election. We won the election and we sought to pass it through the Parliament. The Labor party stood in the way, preferring the economics of envy, rather than the economics of opportunity. Despite both the Leader of the Opposition, the Shadow Treasurer and a cast of thousands of Labor members, who have all supported corporate tax changes in the past. Indeed, it was a former Labor Government with Paul Keating that was responsible for corporate tax changes in a previous government.

So, we knew we had to act, we sought to act, and at that time we had the opportunity to get ahead of the game. That opportunity has been denied to the Australian public by the Labor party ever since the 2016-17 Budget. Now, it is not a question of getting ahead. Now it is a question of not falling behind. The question for the Labor party is how long will they stand in the way of jobs and growth and investment that is needed to put money in the pockets of Australian families so they can deal with all of the things they wish to deal with in their own lives, in their own businesses? This is about ensuring that Australians have economic opportunity. This is about businesses being able to grow their businesses, so that they can earn and therefore afford higher wages for their workers. Higher wages don’t fall out of the sky. They come from the businesses that Australians work for. In those businesses we want to give them that headroom in the tax system which has been recognised not just by the Trump Administration, but the Macron Administration, in the UK and all around the world. They all get it, the Turnbull Government gets it. The only one who doesn't get it is Bill Shorten.

Now, every single day that Bill Shorten does not reverse his position on the Government's Enterprise Tax Plan, is costing our economy. Every single day. He can remove that uncertainty today by saying they will support the Government's Enterprise Tax Plan and ensure that Australia doesn't stand at the top end of corporate tax rates around the world. He can ensure by holding one press conference that Australia's economic position can be enhanced by the passage of the Enterprise Tax Plan. So, that's his summer's homework. My summer's homework will be focused on how I can deliver personal income tax cuts and personal income tax relief for middle and low-income workers. His homework is to ensure that he gets over himself and gets over the economics of envy and faces up to the real economic challenges that Australia has when we are facing such a competitive environment all around the world. By refusing to support Australia's Enterprise Tax Plan the Leader of the Opposition is working for our economic opposition as Australians. He needs to work in Australia's economic interests. It is critical that this obstructionism and populist opportunism that we have seen from Bill Shorten ends here because it is going to cost Australians if he does not do that. So, I would encourage them to re-think their position. I would be happy to sit down again with the opposition if they were prepared to seriously look at changing their view. It's in Australia's economic interests that they do and I would only hope that they would come to their economic senses in the weeks ahead and ensure that this bill can be passed in the new year.

Now, just on another matter that I was going to raise, the ACCC has been given additional powers by me to ensure that they can actually now look behind the bowser in terms of what is happening with how petrol prices are being set. This is a power that has been sought by the ACCC, which we're very pleased to provide them. That will add to their existing powers when they're looking at what's happening in the retail side of this business. This will take it back right through to the importers and ensure that price setting behaviour can be examined at that level as well as what is happening at the bowser itself.

Now, coming into Christmas, I'm sure Australians would agree that they're always as frustrated as everyone else when it comes to seeing those fluctuations in prices. We need to ensure that the ACCC, which is the cop on the beat in this instance, has the powers that they need to do that work and to ensure that petrol prices are as low as they can be, that there's no fix, and that all who operate along that supply chain are doing so in the best interests of consumers at the end of the day. So that's another matter that's come into place as of today. Happy to take questions.

QUESTION:

If there would be a 1 per cent growth what would that mean for unemployment and would it affect the AAA credit rating?

TREASURER:

All of these issues, we have no specific estimate of that at this time but less growth means less jobs. It's that simple. Bill Shorten says he stands up for workers. By standing in the way of the Enterprise Tax Plan, he is saying their jobs can go overseas. That is the outcome of this.

QUESTION:

We have seen company profits at record highs, we haven’t seen wage growth higher. In Japan there are calls for the corporate tax cuts to have some accountability factored into them. So, they need to show wage growth and they need to do domestic spending. Is there any thought about making companies accountable if they want to benefit from these tax cuts?

TREASURER:

What we saw in 12 quarters and more is on average we had negative profits growth over that period. It has been only been in the last few quarters that we've actually seen a pick-up in company profits after several years of, particularly small and medium size businesses, going backwards and having to put their hands in their own pockets, not just to have the modest wage increases that people had over that period but have a wage at all. So, we are only now starting to see an improvement in business profits and business profits are a good thing. Business profit creates jobs. This year, over a thousand jobs a day were being created which is an extraordinary result for the Australian economy. As the labour market continues to tighten, as we are already seeing in particular sectors, we are seeing higher rates of wage growth in particular sectors. So we are starting to see some normal transmission resume when it comes to the labour market and wages and I am hopeful we will see that again next year. We will watch that closely. But first things first, we must ensure that Australia remains competitive. We're playing in the biggest markets of all and we're up against big, strong competitors. We're up against a resurgent United States that has an Administration that understands lower taxes means more jobs in the United States. The Turnbull Government understands that lower taxes means more jobs, better wages, more and better paid jobs, more investment, the things that will drive our living standards up. The Labor party, they're the only ones out there who think higher taxes are good for the economy. So, we implore them to come to their economic senses and to support the Enterprise Tax plan.

QUESTION:

What does it say that two in three voters in Warringah, Wentworth and Kooyong are against tax cuts for big businesses? They are your voters are you out of touch or are they mistaken?

TREASURER:

We have to do the right thing for the Australian economy. We have to show economic leadership for the Australian economy. And we have been doing that, we did that at the last election and at the last election we took the Enterprise Tax Plan to the Australian people, every single electorate, in the entire country, and we won the election. We obtained a mandate from the Australian people to implement our plan to make Australian businesses more competitive. We've legislated that for businesses up to $50 million in turnover. The plan started with small and medium-size businesses. They already have their tax cuts now, and that's welcome. But we need the whole plan to ensure that Australian business can remain competitive. Big business employs people, small business employs people. They all pay people. If want the wages to go up, then we have to have sustainable increases in profits. We think that the money that people earn, the money they earn, whether it is a business or whether it is an individual, we would rather it be in their pockets than ours. The Labor party has the opposite view. That's the big choice that's out there. But particularly on this issue, Bill Shorten can return to what he used to believe was good for the Australian economy, he can stop working for Australia's economic competitors and he can start working for the Australian people.

QUESTION:

What evidence do you have that cutting corporate tax actually generates wage growth?

TREASURER:

The Treasury modelling that was done at the time of the release of the plan which has been out there for several years.

QUESTION:

If the US is cutting 14-15 per cent, Australia 5 per cent, are the cuts enough that you are proposing that are going through, and if they do go through, is there going to be a hit to growth, a subset of that 1 per cent given it is not as big as the US?

TREASURER:

What we've modelled into our forecast, obviously taking into account the government's policies, by taking it to 25 per cent with the broader set of tax arrangements that we have in Australia, as the Treasury has advised, if we can go to 25 then that mitigates, as they've said, the impacts of what the Trump tax cuts would do. So that gets...

QUESTION:

So, there will be growth it just won't be as big as 1 per cent?

TREASURER:

No, [inaudible] the reverse of that. If we can implement the Enterprise Tax Plan then we'll be able to mitigate the impact of the Trump tax cuts. It is one on, one off. So our ability to legislate the whole plan, the advice is, that will enable us to deal with the Trump tax cuts. So, that’s why I am saying, Bill, get on board.

QUESTION:

So you’re saying they’ll be zero hit to growth if your tax cuts go through?

TREASURER:

That’s the advice.

QUESTION:

While the statute rate is obviously very high in reality, not many companies actually pay that given a big series of deductions, etc. available to them…

TREASURER:

In the United States?

QUESTION:

No here in Australia. To what extent would you expect to overhaul the system, simplify it, to make sure that some of those deductions and loopholes etc go away?

TREASURER:

Well, for small businesses for example, we’ve been making sure that we have more encouraging investment allowances, and that’s going to have a positive impact. Australia’s corporate tax system, I would say more broadly, is more effective than many of them around the world. That’s why we can take our corporate tax rate over ten years to 25 and remain competitive, whereas the United States are going to take it to 21, they have a range of other measures which impact on that headline rate. So that’s why our Enterprise Tax Plan will match the Trump tax cuts. That’s why we think we can achieve that. But the frustrations we’ve had in even legislating what is already been done by the parliament – I mean the Labor party actually wants to get rid of what we’ve already legislated. They are still sitting there with $25 billion in the legislated tax cuts for small and medium sized businesses, they’ve got $25 billion they are relying on for the things they said they are going to fund. So they can’t have both. They can’t have the legislated tax cuts for small and medium sized businesses and what they say, what the promised that they’ll spend on, say, education for example. You can’t have both. Our Enterprise Tax Plan is fully costed, fully funded into the Budget, confirmed again by MYEFO just this week. We do the Enterprise Tax Plan, the Budget returns to balance in 20-21 on projection to over $10 billion now. So you can have the tax cuts and you can return the Budget to balance and that’s what the Budget documents say. So those things are achievable and they need to be achievable. The advice we’re getting, based on the work the IMF has done, is that if we fail to respond, then we do put a lot of this at risk. That’s why it’s time for the politics of envy, the economics of envy from the Labor party, and the populism that has been associated with that, they’ve got to put it aside because it’s not in Australia’s economic interests. It’s a big test. Now I know that would be a big back down for Bill Shorten but that would at least demonstrate from time to time, he might put Australia’s economic interests ahead of his own.

QUESTION:

Just on another issue, can you explain why Snowy Hydro 2.0 is now expected to cost between $3.8 billion and $4.5 billion instead of $2 billion?

TREASURER:

The Prime Minister and the Energy Minister will be having more to say on that later.

Thank you very much.