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Transcript of interview with Kim Landers: ABC AM: 16 December 2015: Mid-Year Economic and Fiscal Outlook

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The Hon. Scott Morrison MP Treasurer





Subject: Mid-Year Economic and Fiscal Outlook.

KIM LANDERS: Treasurer, you have just heard the President of the Royal College of Pathology say that he is dumbfounded and surprised by these changes. He is warning of potentially fatal consequences - have you made a mistake?

TREASURER: The pathology business is a very big business and there are a lot of very quite significant companies that are involved in providing these services and it is a very competitive industry too and that’s put a lot of downward pressure on the prices that are being charged in that area. The issue is though that the argument isn’t bought out by the facts because what was happening was we were having increases in bulk billing rates prior to the introduction of these bulk-billing incentives and that continued and so largely what we've discovered is that we're handing out large subsidies, bulk-billing incentives, completely different to the Medicare Benefits Schedule, that's a separate issue, but these bulk-billing incentives are paid to these companies and it's not leading to the increase as a result of providing those subsidies incentives. So, spending that $600 million-odd better on the other challenges we have , like, for example, the cost of almost $900 million over the budget and forward estimates to take the additional Syrian refugees. Now, these things don't come with no cost.

LANDERS: If we just stick to the medical changes for a minute, the medical groups including the AMA have labelled these changes as perhaps yet another co-payment by stealth. Are you prepared for another fight with doctors?

TREASURER: I reject that and I think it's unhelpful to get into those sorts of political debates which - any area that is the subject of some savings measures in a budget have every right to raise issues. But to immediately partisanise this and to immediately politicise it in those terms I don’t think is a helpful way to have a mature debate about the issue.

LANDERS: They're worried about the costs being passed onto the patients and perhaps people shying away from giving the tests

TREASURER: These are large companies that are involved in providing these services, there's a lot of commercial pressures which keeps those prices down. These incentives are paid to the companies - they are not paid to patients. We're seeing the rise in bulk-billing occurring regardless of these incentive payments. So, I have no doubt that they would not welcome the fact that they have a revenue stream that was previously coming to them that won't be coming in the same way that it was before and they have every right to raise that commercial interest.

LANDERS: And you just presided over a write-down of close to $34 billion in revenue. Do you now accept that there is a revenue and a spending problem that both have to be tackled?


TREASURER: As I've always said on the issue of revenue, if you have a revenue problem that means you need to increase taxes and the Government believes that increasing taxes, increasing the tax burden on this economy could retard growth and threaten jobs. That's why we've always been very reticent - I mean the reason we've had a write-down in revenue is quite apparent and that's because of the movements in commodity prices, the revision of the growth forecasts and projections that is based on an honest and sober assessment of the economic outlook. Now Australians understand that. Now, if the suggestion is that we should be chasing commodity prices down the hole with even more significant savings measures or higher taxes, then the Government's argument is simply this that would put jobs and growth at risk. Now, the Budget is not an end in itself. The Budget is a means to an end and the end is jobs and growth and that's what we're focused on.

LANDERS: If we look at the surplus, how can Australians believe you when you say that it's possible that we will return to surplus in 2020- 2021 when the year just seems to be getting pushed back all the time?

TREASURER: That's the projection in the Budget and that's based on the economic circumstances as we know them now. But this year's deficit is projected to be less than last year's and it's less than the year before. The deficits have been coming down year on year, the last two years, including this year, and that is projected to continue until the end of the forward estimates when it will be at 0.7 per cent of GDP. Now that is lower than the average underlying cash balance over the last 30 years. So, we are on that path and each year it is reducing by average of 0.4 per cent of GDP. So we make progress but you make progress in the economic circumstances and you don't cut off your nose to spite your face with higher taxes or even deeper spending measures.

LANDERS: Does the budgetary position increase the pressure on the Government to take some bold economic reforms to next year's election, for example?

TREASURER: We already have outlined quite a number of measures and we're engaged in a discussion about having a more growth friendly tax system as well. But whether it's on the innovation statement that was released last week, or the response to the Harper Review which would see modernising of the delivery of services at state and federal levels, which improves productivity. There are other reports which are due to the Government by the end of the year which are looking in areas of workplace relations and so on. I mean the Government is committed to the economic changes that are necessary to help grow the economy and to help grow jobs and the good news is unemployment is at 5.8 per cent, 340,000 more Australians have a job today than they did a year ago.

LANDERS: But it's projected to rise.

TREASURER: No, it's not. It's not. I mean the forecast in the Budget actually have been reduced for unemployment down to 6 per cent and the better news is it is currently at 5.8. So, even our forecasts on unemployment in this statement - and I stress this is a budget update, it is not a budget, the Budget is where the more substantial measures are always addressed but in this update unemployment forecasts have been reduced.

LANDERS: Let me take you to that issue that you raised about tax. Tax revenue has fallen short of forecast from seven months ago. The Government is set to release a tax white paper next year. Do these figures make tax reform even more urgent? Do you need to take even more drastic action when it comes to tax reform?

TREASURER: Growth is the objective and the tax system can help grow our economy more than it is today. That's why when I talked to the state treasurers last week what we want is a change in the tax


mix which helps grow the economy, not that just provides a bag of cash for federal or state governments to spend. Next year the revenues as a percentage of GDP will return to the long-run average yet expenditure as a percentage of GDP will remain above that long-run average right out to the end of the Forward Estimates. So, when you're looking at the challenges between expenditure and revenue, revenue is restoring next year to the long-run average but we still have a big job to do on spending. But on spending you've got to be careful, you've got to be sober about it, and you have to be patient and measured and that's what the Government's doing to protect people's jobs.

LANDERS: Some of the Senate crossbench are already warning that you could be on a collision course with these new savings. Given that you've already got, as you say, about $13 billion in saving measures still stuck in the Senate, is that wise?

TREASURER: I've got a simple message for all those who take issue with the savings measures. Show us the alternatives. I've had that practice before with the crossbench when we had pension changes from the 14-15 Budget, when I was Social Services Minister. I said I'll take something off the table if someone can put something on the table of equal measure. We were able with the support of the Greens…

LANDERS: So, these savings measures you announced could be up for negotiation?

TREASURER: Well, every matter has to be taken through the Senate which requires legislation. There is no free pass here. If there are alternative savings measures put them on the table. All we've heard from the Opposition in the last 24 hours is they just want to put up taxes. No savings measures just higher and higher taxes and that’s what the Government doesn’t think the economy needs.

LANDERS: We're a little bit, a week out from Christmas, it's a bit of a grim outlook in these budget papers, what's your message to Australians who are feeling bleak about Australia's economic future?

TREASURER: Well the truth is more Australians feel optimistic about our economy than they do pessimistic. That's what the surveys show, particularly the Westpac survey, and that's been consistent now over their last two surveys. Because they understand the transition that's happening in our economy from the investment phase of the mining boom to the more diversified economy we are now seeing demerge. We're seeing a growing momentum emerge in our economy. We can't put that at risk through extreme responses, whether through the calls for higher taxes or the hairy chested sort of commentary we see in some of the papers today calling for even deeper savings measures. You've got to steer a measured path. That's what the Government's doing. We're sober about it, we're patient about it and we're very realistic about it, just like the Australian people are. They're working, saving and investing and we want to continue to back them in that job.

LANDERS: Alright, Treasurer Scott Morrison, thank you very much for joining AM.

TREASURER: Thank you very much.


Further information: Julian Leembruggen 0400 813 253