10 May 2017
Transcript - #2017091, 2017

Interview with Ben Fordham, 2GB

SUBJECTS: Budget 2017

BEN FORDHAM:

On the line, Federal Treasurer Scott Morrison. Good afternoon, Mr Morrison.

TREASURER:

G’day, Ben.

FORDHAM:

Busy day for you, how are you holding up? How’s the response been so far to Budget 2017?

TREASURER:

Well, I think people have been hearing what we’ve been saying and that is we understand the situation they’re in and I think we’re getting our message across that this Budget is designed to guarantee the services that we are relying on, put the downward pressure on the cost of living and to grow the economy to ensure we’ve got more and better paid jobs. And we’ve done all of that while at the same time as bringing the budget back to balance in 2020-21 and keeping expenditure under control at less than 2 per cent growth a year.

FORDHAM:

You’ve announced a $6.2 billion tax on the big four banks plus Macquarie Bank over the next four years.

TREASURER:

Yep.

FORDHAM:

The boss of the Australian Bankers Association, Anna Bligh, said, “There is only three ways that banks can find the money to pay for this tax. It can come from the shareholders, from the savers, from the borrowers or a culmination of all three.” Now when I heard Anna Bligh say that I thought there’s probably a fourth option which would be, taking the $6.2 billion out of the $30 billion profit that they make every year.

TREASURER:

Bingo.

FORDHAM:

But they’re not going to do that. They’re not entertaining that option. The banks are saying that we will pay.

TREASURER:

They would be, I think, confirming in the public’s mind all of the worst impressions they have of big banks in doing that and I don’t think that’s good for shareholder value. I think the banks have an opportunity right now to demonstrate for once, that they are not the big bad banks when it comes to those sorts of things. And I think they have an opportunity to step up.

FORDHAM:

You do seem to be looking through rose-coloured glasses there. I mean, you’ve even acknowledged it yourself, you said, “They could do this for once.” In other words, they haven’t done it in the past, what makes you think they’re going to do it in now?

TREASURER:

I think all bank customers understand that the banks will move their prices whenever they like and they’ll come up with all sorts of reasons for it, and that’s one of the reasons why in this package I announced last night I want to see greater competition in the banks. This levy doesn’t apply to the smaller banks by the way. Doesn’t apply to Bendigo Bank and IMB Bank and Bank of Queensland, MBE, all of those smaller banks and frankly, if people aren’t happy with what they’re getting from the big banks who entrench their position in the market over the past twelve years, well take your business to one of those. But…

FORDHAM:

There are plenty of people though who are entrenched in their bank themselves, people who have been there for a long time and don’t find it as easy as others to say righto, I’m going to switch and save.

TREASURER:

Fair point.

FORDHAM:

For those people, and they’re the big four for a reason, because they’ve got so many bloody customers who do business with them and you’ve got today David Murray, the former boss of CommBank has come out and said, “Look, it’s easier said than done when it comes to policing whether or not they’re going to pass on the cost.” He says it’s extraordinarily difficult to attribute changes across both sides of a bank balance sheet to a particular effect. In other words, banks will be able to find creative ways of passing on the cost and you, Treasurer, have no power to stop them.

TREASURER:

The ACCC will be examining what they do and how they do it and if they mislead or lie to customers then they’ll be taking the appropriate action that they can under the powers that they have. But on top of that then, Ben, I mean this is 0.06 per cent of their liabilities, 0.06 per cent, it’s six basis points which is the other jargon which is used in the financial sector. So this is $1.5 billion a year, out of profits of over $30 billion a year. So my message to them is, do the right thing by your customers. Do the right thing by your shareholders by doing the right thing by your customers. And do the right thing by the country because we’re simply asking banks to support the financial position of the country. This is a levy which is similar to many others in many other parts of the world. This is not extraordinary.

FORDHAM:

Look, don’t get me wrong I mean I was watching your Budget speech last night and I was cheering you on when you got to the big levy on the banks, but we do need to take history into account here, don’t we? They find ways of passing this stuff on and when it comes to reputational damage that doesn’t seem to be something that they really worry about.

TREASURER:

Well, look, that’s a matter for the banks to explain and Anna Bligh can explain that until the cows come home, it’s got nothing to do between me and the banks. It’s not about personalities or anything like that, that’s all nonsense.

FORDHAM:

Alright.

TREASURER:

This is just about ensuring that banks pay their fair share like they do in so many other countries and we think this is a pretty reasonable ask.

FORDHAM:

Let’s move on to the first homebuyers and this salary sacrifice scheme allowing them to put up to $30,000 into their superannuation to help save for a deposit, now doesn’t this mean that their savings are effectively going to be at the mercy of the market? So God forbid if we were to experience another global financial crisis, we may see a similar result to what happened in 2008 where $30,000 can turn into $15,000 overnight.

TREASURER:

Well, I mean those risks can apply to many places that people put their savings but what we’re doing here is that they get a deemed rate of return out of their funds and that is, you know, a lot higher than what you’re getting out of a bank deposit and we’re saying that…

FORDHAM:

So it’s a gamble?

TREASURER:

Well, they’re investing in where they’re putting all their other superannuation money, by the way which is there for their long term retirement incomes. They get a deemed rate of return which is higher than what they’re getting out of the bank deposits, they’re not paying the marginal rate of tax when they put this money in and they salary sacrifice it. So let’s say you know you’re on a 32.5 per cent marginal rate you would be paying 32.5 cents on that extra saving, under this plan you’re paying 15 per cent and then on the earnings you’re only paying 15 per cent tax not 32.5 cents and so this is a…

FORDHAM:

You can see that the scenario that I’m painting there and look God forbid that it would happen again, it will happen again one day but obviously this was something that happened, the GFC, not so long ago and we saw that, we saw the value of people’s investments there in their superannuation cut in half virtually overnight and you’ve just explained that that’s the gamble that some investors might have to take.

TREASURER:

Well, I think that’s overstating the risks here a bit, Ben, with respect. What this does is provides a vehicle which people can save faster for getting their home – 30 per cent faster, it’s a good deal.

FORDHAM:

Ok, can you elaborate on how it would work in relation to this scenario that’s been put to me today? If someone was to pull out their $30,000 on a Friday because they’re bidding for a house on a Saturday and they’re outbid so they don’t get the house so they’ve then got the $30,000 in their hand, do you expect people to then put it back into their super?

TREASURER:

No, well, what happens is that money will be there on their account and it will be highly visible through the way the systems work and that money will be available for when you go to exchange and settlement.

FORDHAM:

Ok, so it’s not actually in their hands?

TREASURER:

Well, it’s in their account.

FORDHAM:

And they show that account at the time that they’re purchasing the home?

TREASURER:

Correct.

FORDHAM:

I see. Let’s stay on housing for a moment, you brought in this $5,000 tax on foreign investors who leave properties empty. Do you think someone who’s wealthy enough to have an investment property in another country and leave it empty, that they’re going to care about $5,000 in relation to a fine?

TREASURER:

Well, it starts at $5,000 for those properties and at the moment they’re paying nothing, and this not only does, I think, provide some incentive for people to make that available, remember a lot of the states and territories are also playing the same taxes on this sort of thing, and we can now swap data with NSW if that’s what they’re going to, Victoria are already doing it. And that will help improve the compliance in those jurisdictions as well. So, the states and territories working together with the Commonwealth, I think to collectively put this disincentive for people to leave property vacant. But the other thing we’ve done with foreign investment, Ben, is when Chris Bowen was a minister, he actually lifted the controls which were preventing foreign owners getting more than 50 per cent of a development. Now I’ve put that back in last night and on top of that I’ve taken away the Capital Gains Tax concession for foreign investors, who are investing in real estate in Australia, including their principal place of residence.

FORDHAM:

Last night, you quietly raised Australia’s debt limit to $600 billion, why didn’t you include that in your Budget speech?

TREASURER:

Well, it was in the budget forecasts where our debt was going and it’s a technical change you have to make. It’s $600 billion, and that’s what I…

FORDHAM:

You didn’t have room for it in the Budget speech?

TREASURER:

Well I didn’t think that added a lot then, but we already said in the Budget…

FORDHAM:

You focused on the good news for the speech and the devil in the details found in the papers, right?

TREASURER:

The $600 billion is the result of the fact that it’s as long as deficits are being run. Well, the debt will keep going up and in addition to that Ben, I announced a very significant investment in infrastructure and to the extent that debt is being used to support that infrastructure investment which is good for the country. Then obviously the Government will issue more securities, but our net debt starts to, peaks in 2018-19 and then starts coming down over the ten years, so in just over one years’ time from now, we will no longer be borrowing money to pay for things that are everyday expenditure – and that is a good financial principle.

FORDHAM:

Treasurer Scott Morrison joining us live from Parliament House, Canberra. Treasurer, in 2012 when Labor lifted the debt ceiling to $300 billion, you said that they’re like an addict, saying they just want one more hit. So now that you’ve increased the debt ceiling to double that figure, $600 billion, are you a junkie too?

TREASURER:

No, what I’ve done, Ben, and what my predecessor did is we reduced the growth in debt by two thirds. We've kept expenditure as a gross at below two per cent and we’re bringing the budget back to balance and for four successive statements, I have now both on my first midyear statement all the way through to the Budget I handed down last night. We’ve kept the target projection for a surplus in 2020-21 and we’ve kept the tension in the cord on spending and we’ve had to deal with $13.5 billion of savings we had to reverse because the Senate wouldn’t pass them. But we’re not going to go off and whinge in the corner about that. We’re just going to deal with it and get on with it and make sure that the budget still comes back to balance.

FORDHAM:

Right, no one’s going to put their house on those projections though, are they? When they come to the budget coming back into surplus, because we know that they’ve been wrong so many times on both sides of politics.

TREASURER:

For the last two years, Ben, those numbers have held, and in fact, at the end of the year we had a $1 billion projected balance in 2020-21. And last night, I announced a $7.4 billion projected balance, so those numbers have actually improved over the last six months and that is a result of the decisions we took in the Budget last night.

FORDHAM:

Former Treasurer Peter Costello says you're not doing enough to talk about debt. He says no one’s talking about paying back the debt, so Peter Costello is a…

TREASURER:

[inaudible] was just talking about it.

FORDHAM:

He’s a respected voice on those issues though, and I spoke on Monday saying on our program here saying this is something that we’re not going to be hearing as much about on Tuesday night as we are about all of the good things we are spending money on.

TREASURER:

Well, one of the reasons the debt over the next ten years will be $80 billion higher than it otherwise would be is because we’re not drawing down on the Future Fund, which is run by the former Treasurer. And that was something that he specifically thought we should do, that is not draw down on the Future Fund and he understands that, that means that our gross debt will be higher than it otherwise would be.

FORDHAM:

You’ve announced a raft of measures cracking down on welfare cheats, including random drug tests for people collecting the dole. One of your crossbench senators, Jacqui Lambie, has suggested today that politicians should be subjected to drug tests too. 

TREASURER:

Doesn’t trouble me.

FORDHAM:

Your Cronulla Sharks have had a problem recently with cocaine, I’m not suggesting any link there, but do you think anyone would be nervous in Parliament House if there was drug testing going on?

TREASURER:

Got no idea. Look these things don’t trouble me. I mean, this is a trial, it’s a common sense trial. A few years ago, we started the cashless debit card, which people said, “That’ll never work, you can’t do that.” And as John Laws used to say, “The civil libertarians and all the rest of it.” But you know, we went ahead and did it, and it’s worked and we’re expanding it. So we’ll have a crack at this, and if it works it’s a small trial – around 5,000 newly going onto welfare and we’ll target in a couple of locations and if it works well, we’ll keep it.

FORDHAM:

Alright. When it comes to that gigantic welfare budget, that’s obviously what you’re doing on the dole. But I heard someone make the comment today that for every one person on the dole there are six on the pension, three with a disability, so while many support these tougher rules for people on the dole, they only make up a small part of that welfare budget, don’t they?

TREASURER:

Well, since a number of people on the disability support pension has fallen under our Government, but as you know when people have made changes to the welfare system in the past, people get grandfathered onto the old rules, and so you’re always going to have that problem until that works through the system at the other end. The best way to get your welfare budget down, under control I should say, over time, is you get people into jobs. Last night, we invested more in a program called ParentsNext. Now, last year, you’ll remember I announced a program called the Youth PaTH which is about getting longer term unemployed people into work and that program’s about to get going after we announced it last year. This year we’re putting more money into what’s called ParentsNext. Now that gives young mum’s, can be 17 year olds, 16 year old young mum’s, particularly in a lot of Indigenous communities and giving them the support so they understand what their options are, how they can get education, how they can get into jobs, how can they get childcare support while they’re going and doing some studies and it’s been very successful for us so we’re going to expand that program and help those young mum’s.

FORDHAM:

Alright, couple of quick ones. Paul says, “How about asking the Treasurer: where’s the money for a new power station or two to give everyone cheap power, not give poultry handouts to pensioners?”

TREASURER:

Firstly, for pensioners, we’re giving them back the pensioner concession card. There’s 90,000 former pensioners who lost that and… Ben, I’ve got a division mate, so I’m going to have to go and vote in the House. I’m sorry, but, look I’m happy to come back and talk on another day.

FORDHAM:

I understand you’ve got to get into the House.

TREASURER:

I’ve got to get into the House and vote. Thanks, Ben.

FORDHAM:

Good on you, thank you very much. Federal Treasurer Scott Morrison, not much you can do about that.