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Budget 2016: Transcript of interview with Barrie Cassidy: ABC Insiders: 8 May 2016: 2016 budget - a national plan for jobs and growth; ten year enterprise tax plan; Turnbull government says no to Labor's housing tax' Bill Shorten and Labor's attacks on small business; immigration portfolio



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The Hon. Scott Morrison MP Treasurer

TRANSCRIPT ABC INSIDERS SUNDAY 8 MAY 2016

E&OE

Subjects: 2016 Budget - A National Plan for Jobs and Growth; Ten year enterprise tax plan; Turnbull Government says no to Labor’s housing tax; ; Bill Shorten and Labor’s attacks on small business; immigration portfolio

BARRIE CASSIDY: Now we'll go straight to Cronulla where we're joined this morning by the Treasurer, Scott Morrison.

Treasurer, good morning. Welcome.

SCOTT MORRISON, TREASURER: Good morning, Barrie, and happy Mother's Day everybody.

BARRIE CASSIDY: Now, you go into this election with a big lead on seats, courtesy of Tony Abbott, but the polls are 50-50. Does that suggest that whatever happens, Malcolm Turnbull is unlikely to do as well as Tony Abbott did?

SCOTT MORRISON: National elections are always tight, Barrie. You know that. You've covered plenty of them. You've participated in many. I mean, you're one of the few that have actually seen an election campaign as long as this amongst the commentariat. But what is important from our perspective is that this week we laid out a national economic plan in our budget. It wasn't just another budget. It had to be a national economic plan because that's what our economy needs and it needs to support small and medium-sized businesses in particular, the sort of businesses that I've been visiting for many months now and as a local member of Parliament over a long period of time, because they're the ones who are putting people into jobs.

BARRIE CASSIDY: Alright. So it's going to be a campaign on economic management. But right on cue, Moody's, the ratings agency, said the economy is increasingly vulnerable, the deficit will be wider and longer than you predict, so there's a challenge there for you.

SCOTT MORRISON: Well there are a lot of sensitivities in the economy. That's absolutely true. This transition we're going through, from the investment phase of the mining boom to this more diversified economy - I mean, we are doing well in that. Remember last year we had around 300,000 jobs, real growth of around three per cent - that's around $40 billion added to the economy. The youth unemployment rate today is lower than what it was at the last election. 50,000 youth jobs over the last 18 months. But, you know, you're absolutely right: I mean, who is best going to be able to manage this transition and make sure it all stays on track? And we've laid out the national economic plan for jobs and growth that will enable us to work through that and achieve that and we're doing it by backing the people who are making it happen: hardworking middle income families and small and medium-sized enterprises who are the people who are putting people into jobs.

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BARRIE CASSIDY: Does it annoy you though when Moody's says that your deficit predictions are wrong?

SCOTT MORRISON: Well, they'll make their assessments and Fitch and others will make their assessments and that's their job. It's my job to put together a budget, as I have this week, which provides that national economic plan. Importantly, what we've done in our budget, Barrie, is haven't spent more than we've saved and we have not increased the projected tax burden on the Australian economy over the previous estimates and last year's budget. Now that is in stark contrast to our opponents, who are spending five times more than they're either raising in taxes or they've got in savings over the next four years, because budgets are done over four years, Barrie, not over 10.

BARRIE CASSIDY: Yes, but then again, you did promise the - that 10 years from now, the company tax rate would be at 25 per cent. Why were you so coy about telling the Australian people the cost of that?

SCOTT MORRISON: Well those figures were released on Friday. Bill Shorten had his speech on Thursday night. It's appropriate for Treasury to be able to give the explanation around why you don't put 10-year figures on line items in a budget. I mean, Penny Wong made that very clear that they didn't release 10-year costings on individual items in the Budget. What you do is you take all your measures together and you put them in the underlying cash balance projection over the medium term, which is what the Prime Minister referred to. So, yes, it does cost $48.2 over the 10 years to get there. It's included in our underlying cash balance projections over the medium term. But what we saw from Bill Shorten this week was more than $100 billion in new taxes announced in less than 30 minutes. I mean, that has to be some sort of record.

BARRIE CASSIDY: Yeah, but - but you and the Prime Minister are accused of being tricky over this, partly because when you were asked about it by reporters, you said, "It's in the Budget. It's in the Budget. Look it up," when in fact it wasn't.

SCOTT MORRISON: Well it was incorporated in the underlying cash projection…

BARRIE CASSIDY: The figure wasn't there. The $48 billion figure was not there.

SCOTT MORRISON: Well - Barrie, it was included in the underlying cash balance medium-term projection, which is where those longer-term estimates always are and the figures were released by Treasury on Friday. So, what I want to know is what are the four-year estimates of what - we are yet to see one four-year estimate from Bill Shorten in terms of what he's doing. There's a reason for that, Barrie, because they have $80 billion of additional commitments. The things that they - even just on the things that they oppose in the Parliament, there is $20 billion over the next four years they have to find to fund the things they say they won't proceed with that are in the Government's figures.

BARRIE CASSIDY: Well there's $48 - they begin now with $48 billion because they're not spending the money ...

SCOTT MORRISON: No, that's over ...

BARRIE CASSIDY: Over 10 year, yes, over 10 years, yes.

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SCOTT MORRISON: That's over 10 years, Barrie. Over 10 years, over 10 years. Over four years, they're down some $20 billion just on what they're opposing and they've only got $14 billion worth of tax rises over the next four years to cover that. Now in addition to that, there's all the other measures that they say they opposed, like the changes to foreign aid, like changes on Family Tax Benefit to pay for our Jobs for Families package - like all of those changes. Now that's more than another $40 billion over the next four years and on top of that they've got $16 billion in additional commitments over the next four years which relate to education and other things. Now, they've got commitments hanging out there, Barrie, which are five times higher than what they're being able to pay for in the next four years on either their big tax increases or their very modest savings. No wonder they want to talk about 10 years, Barrie, because over four years, their numbers don't come close to adding up.

BARRIE CASSIDY: Let's look at superannuation changes. Are you surprised at the level of hostility coming from those who already potentially have $1.6 million in their super accounts?

SCOTT MORRISON: What we've done in this budget is ensured that we've focused on the top four per cent of those who have had great success in life and they've worked very hard for it and good for them. But superannuation tax concessions have to be very properly targeted to fit the purpose, which is to ensure that people over time are not dependent on a full or part-time pension. And what we've done is we've put a ceiling on just how much you can have in a retirement savings account that has no tax on its earnings. Now of course you'll pay no tax on what you draw down out of that account, and that applies to everybody. If people, when they have to draw down over one - the amount above $1. 6 million and put it in their accumulation account, they'll pay no tax on what they take out of there, but they will now pay tax on the earnings above in those very high balance accounts, and that's 15 per cent. Now, that is, I think, a fair change. It's a change that enables us to take $6 billion in revenue over four years and invest $3 billion of that back into ensuring we can put in place the Low Income Superannuation Tax Offset, which supports 25 per cent, making them better off, who have currently got superannuation, and it also means we can put the money into the tax cuts, which can drive the economy and drive jobs.

BARRIE CASSIDY: And doesn't it also mean that they can supply it with their spouse and so in fact they can have $3.2 million before they pay the 15 per cent?

SCOTT MORRISON: Well there are rules around that, and what we have done, and this applies to everyone over the course of their life, if you're a primary income earner, we've lifted the threshold up to $37,000 for those on the second income where the primary income earner can invest more in their spouse's superannuation. But at the top end, that would be difficult to achieve unless there is a clear earnings record there. But the other thing we've done, Barrie, is we've harmonised the rules...

BARRIE CASSIDY: But still, they can fund a decent - they can fund a decent lifestyle, surely...

SCOTT MORRISON: Well of course they can.

BARRIE CASSIDY: ... with $1.6 million and then pay 15 per cent on top of that.

SCOTT MORRISON: Of course they can.

BARRIE CASSIDY: Yeah. OK, but ...

SCOTT MORRISON: The earnings estimate that has been given to me is between about $80,000 and $100,000 on what you'd have on a $1.6 million balance. And of course, if there were two people

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with more than that in a tax-free earnings account in superannuation, well, they'd be able to do better. But they've worked hard for it, they really have and they've earnt it over the course of their life and that's something which is great to achieve. But we've got to make sure these superannuation tax concessions are targeted to those who we can ensure don't then end up on a part or full-time pension. That's the point.

BARRIE CASSIDY: Now just on negative gearing, why do people deliberately structure an investment to make a loss and why does the Government support them when they do?

SCOTT MORRISON: Well this provision is a normal income tax principle that's been around for more than 100 years and ...

BARRIE CASSIDY: But why is it - why is it normal when you can do it deliberately and then the Government helps you out?

SCOTT MORRISON: Because Barrie - it's a simple tax principle. If you're spending money and it's costing you to earn an income, you can offset it against the income that you have in terms of the tax you pay. It's not something that just applies to property, Barrie; it applies right across the tax system. Two thirds of Australians, one in five police officers actually utilise this long-standing tax arrangement to provide a future for their families. And it is another alternative to the other savings methods that are out there and it is really helping mum and dad investors and particularly small business investors. What Labor is doing is putting what is in effect a housing tax right across the board with this. It will undermine house values. And I hear people say even at the modest level, that it might only be, say, two per cent. Well, two per cent on the value of someone's home, that can be anywhere between $10,000 and $20,000. I mean, that's someone's entire interest payments and more in many cases.

BARRIE CASSIDY: Yeah, yeah. But the example ...

SCOTT MORRISON: I don't think they'll take too kindly for that to be just wiped off the value of their home.

BARRIE CASSIDY: The example that was given there is that rather than the value of your home going up seven per cent, it will go up five per cent.

SCOTT MORRISON: Well, what people like John Daly were saying is it could undermine house values by about two per cent…

BARRIE CASSIDY: Yeah, that's what he said.

SCOTT MORRISON: Now, the problem with that, Barrie, is that household consumption is what is driving our economy. In the December quarter national accounts, 0.4 per cent out of the 0.6 per cent growth was related to household consumption. Now if you want to crash confidence in the economy, go and play around with the value of the family home, which is what Labor's proposal, their housing tax proposal does. So it has two negative impacts. One, it doesn't do anything about housing affordability. It doesn't do anything material about supply issues. I mean, this applies to people buying shops and factories. But secondly, it really does undermine confidence in people's own - the value of their own home which can affect their consumption, Barrie, and that's the last thing we should do.

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BARRIE CASSIDY: How does it not do anything about housing affordability if you're saying that it's gonna take value off the cost of the house?

SCOTT MORRISON: Well what it does, Barrie, is when you go and buy this home, the minute you put the key in the front door of a new home under Labor's housing tax proposal, it turns into an old home. And that means the investors or others you're going to sell it to perhaps down the track to get into your next property, well, they won't be there and it's gonna become harder and harder as you go forward. The family that Malcolm and I visited the other week, he was a plumber. They were a very modest family living in a weatherboard home not more than 20 minutes drive from where I am today. They've been able to use these arrangements to get themselves into the home they are now, to pay down their debt and to buy their next home. And this is a ...

BARRIE CASSIDY: Is that the family that bought the house for the - that's the house that bought the family for the one-year-old?

SCOTT MORRISON: So, let me get this right, Barrie. You think it's a bit of an issue if someone's going to invest to provide a future for their kids? Because that's what that family did and they were of modest means. He's a small business person who works really hard. His wife works for the Jesuit Social Services in Parramatta. They're making sacrifices to ensure that they can build up some capital for their young daughter. Now I think that is what Australians are all about. Others might disagree with that, Barrie, but I think this gives them a real opportunity and I'm not gonna rip that opportunity away from Australians by whacking a big housing tax which will undermine consumer confidence, it'll undermine people's own home values and have all sorts of disruptive impacts on the economy which the Labor Party haven't thought through.

BARRIE CASSIDY: In the time available, I want to ask you a question about your time when you were Minister for Immigration. Now, this week the Government has paid compensation to Save the Children because they were wrongly accused of encouraging asylum seekers on Nauru to self harm. Is that a fair and reasonable outcome and is it now time to apologise?

SCOTT MORRISON: Well, I set up the inquiry that led to these outcomes, Barrie, and that's why I set it up, that we could get to the bottom of what was happening there. I drew no conclusions on the material that had been presented to me at the time and so I think the ...

BARRIE CASSIDY: Well yes, you did.

SCOTT MORRISON: ... appropriate course of action has been taken. No, I didn't, Barrie.

BARRIE CASSIDY: At the time?

SCOTT MORRISON: Barrie, I did not and for you to - no, Barrie, you should go back and check the transcript.

BARRIE CASSIDY: I have.

SCOTT MORRISON: I was very careful and I at no time drew a conclusion from it. I said this was the evidence that was presented to me as there was very serious evidence presented to me about issues of sexual assault in those places, which I also asked to be investigated. I'm pleased that those matters have been concluded and I'm pleased we've been able to get to the bottom of all of that. This has been a very difficult issue over a long period of time. And what I am pleased about, Barrie - and there's one figure you won't find in Labor's costings for what Bill Shorten mentioned the other

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night: the $11. 6 billion cost blow out they will have to put in their budget figures because I have no doubt that Bill Shorten will not have the mettle to be able to ensure that those boats don't come back.

BARRIE CASSIDY: Treasurer - Treasurer, at the time…

SCOTT MORRISON: I've seen him up close. And I know he - I know he doesn't have the mettle to do it and the Australian people know he doesn't have the mettle to do it, Barrie. But I was very clear at the time.

BARRIE CASSIDY: We will get back to this. Yep. Let me show you how clear.

SCOTT MORRISON: Well, we can bring it back up if you like, Barrie.

BARRIE CASSIDY: Let me show you how clear. This is what you said: you accused them of being political activists. You said they made false claims.

SCOTT MORRISON: No, Barrie, I did not do that.

BARRIE CASSIDY: Yes, you did. I've looked at the transcript.

SCOTT MORRISON: I did not say that. I said - Barrie, I said the evidence that was presented to me ...

BARRIE CASSIDY: You said they allegedly coached self-harm.

SCOTT MORRISON: Allegedly.

BARRIE CASSIDY: You said they used children in protests. Is it not now ... ?

SCOTT MORRISON: Allegedly. And that's ...

BARRIE CASSIDY: The allegedly applied to just one allegation.

SCOTT MORRISON: I said allegedly, Barrie.

BARRIE CASSIDY: To one allegation - they coached self-harm. But there was no allegedly about them being political activists, there was no allegedly about them making false claims. Surely now you've paid compensation, that's a concession of guilt, it's time for an apology.

SCOTT MORRISON: Barrie, those evidences that were presented to me I had investigated fully by a proper process. I did the job that I had to do in that situation, just as I am doing the job now as Treasurer, Barrie, to ensure we have a strong national economic plan that Australians can count on to ensure we transition from that investment phase of the mining boom to a broader based economy. That's my focus now, Barrie, and it's important that we ensure that we get that plan in place because that's what's going to support jobs in the future.

Bill Shorten's saying that from 1st July of this year, some $100,000 businesses employing 2.2 million Australians who have a turnover between $2 million and $10 million don't deserve a tax cut. If that's his view, and it is his view, he doesn't understand what's going on in the Australian economy.

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What the Australian people need is a strong national economic plan and they also need a Government that knows how to stop the boats in the first place, which is what I did, together with Tony Abbott and the whole team, and to ensure they stay stopped, Barrie. The Australian people know that if they elect a Coalition government, that's exactly what they'll get.

BARRIE CASSIDY: OK, we're out of time, but thanks for your time this morning.

SCOTT MORRISON: Thanks a lot, Barrie.

(ENDS)

Further information: Julian Leembruggen 0400 813 253, Kate Williams 0429 584 675