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Budget 2018: transcript of interview with Sabra Lane: ABC AM: 9 May 2018

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The Hon. Scott Morrison MP Treasurer




Subjects: Budget 2018

SABRA LANE: Mr Morrison, welcome to AM.

TREASURER: Good morning Sabra.

LANE: Sir Humphrey might say this is a very courageous Budget based on very heroic assumptions. Why should Australians believe these figures?

TREASURER: Well, he’d be wrong if he said that and most economists are saying the opposite as well. The forecasts, as always in our Budget, are conservative. Our forecasts for growth are lower than what the Reserve Bank is saying, what the IMF is saying, so they are very consistent, I think, with where the consensus is on where the economy is heading. And the economy is strengthening. We’ve seen that happening. We’ve seen that both in the receipts that have already been occurring. Our estimates on things like commodity prices have always been on the conservative side of the line and that’s why we’ve been able to produce the better results each time I’ve brought forward a Budget update.

LANE: What about on tax receipts though, the Government’s collecting nearly $26 billion more in taxes over the next four years than Treasury predicted just six months ago. The Government’s now using that windfall to give away a tax cut assuming that those forecasts are absolutely rock solid.

TREASURER: Well again, Sabra, that’s not what’s revealed over the forward estimates, particularly over 2017-18, 2018-19 and 2019-20. All of the additional revenue, and they’re the years particularly where company tax receipts have been boosted by commodity prices, and in those years every single cent of that, in those 2017-18 and 2018-19 years, are going to the bottom line in that $25 billion figure or thereabouts. About $4.5 billion of that is actually in GST receipts so that goes in the Commonwealth coffers and then goes straight back out to the states. That’s how the GST works. In the last two years, we’re in surplus to the tune of over $10 billion and an improved surplus, that’s when our tax speed limit kicks in. That means when taxes are rising above 23.9 per cent, we made sure the Australian people actually get to keep it.

LANE: Why are you prioritising tax cuts over a surplus, given that there are risks? There could be a trade war; Australia has not had a recession for 27 years; and China might slow.

TREASURER: Well, it’s all about creating a stronger economy. Lower taxes create a stronger economy and whether that’s for businesses, small businesses in particular, where we’ve already seen the benefits of that with the legislated tax cuts. Or supporting lower and middle income earners who you know at those levels of income, their consumption levels are higher in terms of what their earnings are and this also supports the economy. So, a stronger economy is our best defence against


the shocks that can happen globally. Having taxes which cripple the economy is no way to prepare yourself and that’s what our opponent’s plan is.

LANE: But there is no buffer for us, should any of those things eventuate.

TREASURER: There’s a surplus rising of over 1 per cent of GDP over the medium term and the surplus actually rises to 0.8 per cent of GDP over the Budget and Forward Estimates and the return to balance has actually been brought forward by a year. So, a higher fiscal position, a stronger fiscal position, combined with debt reducing by $30 billion over the Forward Estimates and by over $230 billion over the next ten years. So debt is coming down, the surplus is improving, expenditure as a share of the economy is falling, taxes actually capped, I mean, that’s what you do to create a stronger economy and a stronger Budget.

LANE: The Government’s hoping to bag $5.3 billion over the next four years by cracking down on the black economy. That seems to be a pretty big number. Where is that money going to come from?

TREASURER: Well it’s a range of initiatives. First of all, there is a $10,000 ban now on cash payments in the economy. On top of that there’s work being done on areas where income is not well reported and if you are paying wages to people and the income is not being reported and you’ve been caught, well that wage expense will not be able to be tax deductible for that business. So, there are some tough measures in here to back in what the Black Economy Taskforce has recommended to actually yield the results there. Then there’s of course the illegal tobacco crackdown as well and the significant measure there and making sure that things get taxed at the warehouse before it leaves, because some of this stuff leaks out the side door and the back door and goodness knows where. So, there’s a lot of tough measures and resources to back up that collection of that revenue.

LANE: As you’ve pointed out the tax cuts are very much aimed at middle and low income earners. A ‘swinging voter tax offset’, as Chris Richardson put it last night, how much of this is actually aimed at erasing the memories of Australians, and that very first Abbott Government Budget in 2014?

TREASURER: Well, it’s all aimed at ensuring that the people who work hard are sharing in the strengthening economy and getting the relief they need. At that level of tax relief, remember it all comes in one hit, it’s done through the tax refund scheme. So, it comes all in one cheque. And that’s filling up the gas tank six times; it’s getting to work from Western Sydney into the CBD and back for about two to three months on your train tickets; it’s school kid’s uniforms and their books for a year and for families, because of course if you’re talking about two middle income people, you’re talking about over $1,000 a year, every year. And so that’s real relief. Now, it’s modest, of course. It’s affordable, it’s responsible. I’ve always said it would be. For anyone who thinks that all of those things I’ve just mentioned, let alone a quarterly electricity bill, is not important for people, I think they’d be out of touch.

LANE: Some of these predictions though are beyond the Budget forwards. In seven years’ time you’d like Australians earning $41,000 a year to be paying the same rate of tax as someone earning $200,000 a year. Many would wonder what is equitable about that?

TREASURER: Well, you’ve still got a progressive tax system. That hasn’t changed. In fact, the percentage of people at the end of this plan, who are on the top marginal tax rate is actually slightly higher than what it is today. But what we are doing is we’re saying bracket creep is something that robs Australians of the extra hours, the extra overtime, the pay rise that they would hopefully get, and the strengthening economy. And we’re saying that for your entire working life, at the end of this plan, you will never face bracket creep again for most working Australians. But for those who are earning more, they’ll pay more tax, that’s how the system works.


LANE: But why should a battler in western Sydney be paying the same tax rate as a well-paid public servant driving a very nice car in Canberra?

TREASURER: Well, they’re not paying the same amount of tax because the average…

LANE: Same tax rate…

TREASURER: The median tax paid for people earning under $37,000 at the moment is $1900. Now for people earning say between $87,000 and $180,000, they pay over $30,000 tax a year. And those on the top tax bracket, they pay over $80,000 a year in tax. So, when you’ve got less than a quarter of the tax paying population paying two thirds of the tax in this country, I’d say we have a very progressive system and we’re retaining that.

LANE: Treasury’s also forecasting that wages will rebound to levels not seen since before the global financial crisis, possibly above potential pace it says - 3.25, 3.5 per cent. You said a couple of weeks ago you weren’t Santa, but perhaps you believe in the tooth fairy given that these forecasts.

TREASURER: No, I think that’s a pretty unkind assessment, Sabra. What we have done in these forecasts, was actually revise that wage estimate down from MYEFO. I mean that’s what we do. We stay on the conservative side of the line, and what we’re talking here with wage growth is it going back to about long-term trends. It’s actually just below that actually for wages…

LANE: Still, you’re assuming that wages are suddenly going to be very generously…

TREASURER: No, not suddenly, over four years…

LANE: Generously going up.

TREASURER: Suddenly is not four years, Sabra. Suddenly is like this year. That’s not what we’ve forecast this year. That is over four years from now. That’s when that 3.5 estimate kicks in, and as I said, I think sits very conservatively in terms of overall outlooks for the Australian economy.

LANE: The Budget papers also say that there is a risk that household spending will be affected by an unanticipated tightening in financial conditions, possibly as a consequence of the Royal Commission. What does that mean?

TREASURER: What is means is that we’re yet to see what the broader impacts are of how the financial system will react. Now, if they become more conservative in their lending practices and that is the path they go down, or if they’re concerned about how regulatory systems may encrypt more what they’re able to do in terms of extending credit, then that’s what’s being highlighted by the Treasury in making that point. Now, that’s always a risk with these, that’s always a risk with these sorts of endeavors and it’s one that the Government has always understood. But the Treasury also point out that it is too soon to tell on those sorts of issues. So, they’ve just flagged that as a risk.

LANE: Does it worry you that Australians will close their wallets and shut their purses?

TREASURER: No, they’re not saying that Australians will close their wallets. They’re saying that the financial system would close debt lending and that is not a risk that is present at the moment. What they’re saying is that we have to be careful how we manage this to ensure that credit continues to flow in the economy. The reason we survived the global financial crisis is because our credit system, our financial system, was robust and did lend through that crisis, and we want to ensure that that continues as the economy obviously strengthens and we don’t needlessly see that credit restricted.


LANE: On the aged care package, the Government is spending an extra $1.6 billion over four years on 14,000 in-home care packages. The waiting list was 106,000 in December. That is just a drop isn’t it?

TREASURER: Well, in December we increased it by 6,000 as well, and that’s 20,000 we’ve increased it for by the year. Of the figure that you’ve mentioned…

LANE: That’s still 3,500…

TREASURER: Of the figure that you’ve just mentioned, about 40,000 or thereabouts are people are already in the in-home care system, they’re just on a lower level package than…

LANE: Yeah they’re not…

TREASURER: …than they would like to be. And that’s why since 2017, the number of high care places, high care places were put in their home care arrangements, are over 80 per cent higher than they were in 2017. So, yes there’s more work to be done there Sabra, but it’s a pretty big effort based on improving the number of places to support the choice of older Australians to age at home.

LANE: That’s 3,500 places a year. What do you say to the families who are still waiting for help?

TREASURER: I say we’ve increased the number of high care places by over 80 per cent since 2017. I say that’s a very strong start to dealing with this problem and the Government will continue to work on it.

LANE: So, that’s more to come?

TREASURER: Well, the stronger economy is what is going to enable me to do that. And if we keep focusing on building a stronger economy, then that’s what pays for things like that.

LANE: Scott Morrison, thanks for joining AM this morning.

TREASURER: Thanks Sabra. Great to be here.


Contacts: Andrew Carswell 0418 505 376, Kate Williams 0418 872 921, Sonia Gentile 0455 050 007 The Hon. Scott Morrison MP, Sydney