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Address to the Higgins 200 Budget Breakfast, Melbourne



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Address to the Higgins 200 Budget Breakfast, Melbourne sjm.ministers.treasury.gov.au/speech/011-2018

11 May 2018

Speech Mark and Nicole and Steve, he calls himself lucky Steve, you saw him in the video there, Jo and Cruz and Nick, they’re like millions of Australians today. As they’ve got up this morning, and they might’ve been caring for an aged parent, and exchanged that loving morning smile, probably the best part of their day. They may be sitting on a tram this morning, on a train. They may be on site already. They can be out on a rural road somewhere. Wherever they are in Australia today, whatever they’re doing in Australia today this morning. One thing’s for certain, and that is the economy they live in over the next ten years, is going to determine a lot for them. It’s going to determine their choices, it’s going to determine the job market their kids are walking in to, that they themselves are in. It’s going to determine how they can save, how they can plan for their future. The economy is not a theory. It’s real.

It’s what we live in. And, other than your health arguably, there are few things that are going to determine people’s choices in this country more than that. The economy we live in.

That’s why in this Budget, we have delivered a plan for a stronger economy. Because we want the economy that Australians live in over the next ten years to be stronger. We want them to have more choices. We want them to have more opportunities. We want them to be able to look forward to the next day, with less anxiety. If you don’t have a strong economy, then everything else suffers. There’s no money tree. There is the strong economy that we all rely on wherever we are, whatever circumstance we’re in. That’s what pays for the show. And in this Budget, you’ll see, that over the next four years the Australian economy will become a $2 trillion economy - a $2 trillion economy.

And Australians will be asking themselves, who do they trust to manage a $2 trillion economy? Who do they trust with the economy that they are going to live in, that they’re going to seek and thrive in? The small business owner who’s risked it all. What sort economy are they relying on to make sure that bet comes good on the business that they’ve made and the sacrifices they’ve taken and the risks they’ve taken.

Who are you going to trust for that stronger economy? A $2 trillion economy. A 1/6

Government that over five years, as I’ll take you through in the slides this morning, that’s turned that ship around. Whether it’s on debt, or on deficit, or on jobs, on all the metrics, heading in the right direction with a clear plan for a strong economy, that can give Australians hope and confidence and a clear plan for their future? Or unbelieva-Bill? Bill Shorten. Unbelieva-Bill. That’s who he is. Rolled gold promises he made to workers when he represented them. Rolled gold promises he made to the leaders when he served them.

Rolled gold promises he made about the people who’ve been sitting in his own Parliament.

Unbelieva-Bill. Every time you hear Bill Shorten talking it’s unbelieva-Bill. On every occasion. And you know what, Australians know it. They know this bloke is shifty. And they know he’s unbelieva-Bill. And so it really is a question of trust. An absolute question of trust. Just as it was when John Howard and Peter Costello were in charge of what was not then a $2 trillion economy. But I tell you what, what they did put us on the path to be a $2 trillion economy. And we want to be continuing to be that Government, which continues Australia on the path to a stronger economy. Not a weaker one. A stronger economy is not built on bitterness and envy and the politics of bitterness and envy, but it’s built on the economics of opportunity, of aspiration, and that’s what this Budget is about.

Mark, Nicole, Steve, Jo and Cruz, Nick. Nick’s actually from the Shire in my electorate in Sydney, started a business called Modular Walls fifteen years ago. It’s now a $20 million business. He’s benefitted from the instant asset write off in recent years to get himself up over $10 million up to $20 million. He’s benefitted from the small business tax cuts. He’s benefitted from all of these things. And his business is growing, employing fifty people now, in my own community.

Jo and Cruz, Jo, is very happy because in this Budget, because of a stronger economy, we’ve delivered a drug onto the PBS called Spinraza, which will cost the family $370,000 a year, all beyond her capabilities, she knows that. As a result of a stronger economy, all Australians can now be proud that young Cruz is getting that drug for $40 bucks a script for a year. That’s a wonderful thing to be able to do. That’s what you can do when you have a stronger economy. You can’t do it if you can’t deliver a stronger economy or manage it.

And good old Steve, Lucky Steve as he calls himself, Lucky Steve lost his business during the GFC. And then he went back to school and trained a security guard, and now he’s got both knees all bunged up from two car accidents which he insists were not his fault if you ask him. And he’s out there doing that now, and he knows he’s going to have to work longer because he lost all of his super when his business went bust. So what he is now doing is getting himself back on his feet, literally, and the changes we’re making on super, the changes we’re making to support older Australians in this Budget are all helping him.

But what I wanted to focus on this morning as we go through the slides is how we’re turning that ship around and how a stronger economy - and how we continue to do that for the next four years, ten years - is going to keep us on that track. Over the last five years of our Government, we have been turning the fiscal situation around in this country. And we have had a pace of, to date, fiscal consolidation of 2 per cent and that will go to 3.8 per cent over the balance of the forward estimates period, when we will reach that $2 trillion economy mark. And we will have a modest balance in 2019-20, but we’re not here crowing about it, that’s what the numbers show. But we’re always very conservative when it comes to these things. We’re always very measured, we’re always very responsible, because it’s the

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money of the taxpayers of Australia that we’re managing so carefully, but that balance does build up to $11 billion in 2020-21, and onto $16.6 billion in 2021-22. But if you’re going into the medium-term, you can see there that those surpluses build to 1 per cent of the economy and more. But it does so with one very important condition attached to it, in a positive way. And it does so while ensuring over that period of time that we keep taxes under control, that we keep a speed limit on taxes, and that we ensure that you don’t allow your taxes to consume your economy and suffocate growth.

Higher taxes mean a weaker economy. Higher taxes all Australians pay for them, regardless of whether they’re levied on you or not, because of the crushing burden of taxes on the economy, that’s what suffocates jobs, suffocates growth, and ultimately leads to a weaker Budget.

Last year when I came to this event, I said that in the following year we would no longer be borrowing to pay for everyday expenses. Well I was pleased, and I know this was in the half-year statement in December, that we were able to get to that one year early. And while the Budget is not back in with an underlining cash balance until 2019-20. From this year 2017-18, right now, for the first time in a decade, Australia is no longer borrowing money to pay for welfare payments. We are no longer putting welfare on the nation’s credit card.

That’s the first time that has happened in a decade, and it’s an important goal we have been working to for many years. But the other goal has been to turn the debt ship around.

2017-18 is the year that net debt peaks, and then falls. It has taken us five years to arrest the growth in the debt. Five years. We inherited debt growth at over 30 per cent per annum.

And over the last five years we have been slowing that down. It’s like jumping onto the, I know I’m not in a Rugby League town so I promise you I won’t give too many Rugby League analogies this morning, but here’s one. You try and pull out those really big guys in a game of rugby league, you’ve got to really wrestle them. You’ve got to jump on their back and you’ve got to wrestle them to the ground. And it often takes more than one of you to try and tackle Andrew Fifita in the field. It’ll take you most of the afternoon. He’s a huge unit.

And that’s what that debt has been like for us for the last five years. As the Government, we’ve wrestled it and we’ve grabbed it, and we’ve pulled to the ground, because from now on, we’re paying down debt. Debt will reduce, net-debt by $30 billion over the next four years. Over the next ten years, it will fall by more than $230 billion to 3.8 per cent of GDP over the next decade. As Peter said the other night, it takes you a decade of surpluses to pay down debt, he knows, because he did it. Net debt, $96 billion, paid down over the course of the Howard Government. We’re now on that path to arrest that broken debt and to now be in a position to start paying it off.

The risk of Labor getting their hands back on expenditure will see that turning point turn the other way, and we’ll just see that line go up again, and again and again. And we cannot risk it. On gross debt, gross debt in this Budget compared to what we said in MYEFO is actually around $126 billion less, and that’s the product of budgets moving into balance and staying there, and net interest payments and interest payments falling as a result cumulatively.

And, as I’m sure Peter would remind you, that that on gross debt, the reason the line doesn’t run the same way as the net debt is because we’ve made, I think, the very prudent decision in last year’s Budget not to raid the Future Fund. And they’re earning around about 7 to 8 per cent a year. We’re borrowing at just over, or around 3 per cent a year. Why would

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you raid a Future Fund that is earning for you at that level to pay your unfunded superannuation liabilities and not allow it to reach a level of maturity where the liabilities it’s supposed to offset align with the maturity of the fund which can them meet them? So, in the short-term and the medium-term, over ten years it’s our commitment not to touch the Future Fund, and to allow the Future Fund to continue to keep [inaudible], and in the meantime we’ll obviously use issuing of Commonwealth Government securities to meet those requirements, because it costs us less to do so. And we’ll continue to do that. But the net debt trajectory, I think, is very clear. And we’re on now the path of bringing that debt down.

We have the lowest spending growth of any Government in fifty years. The lowest spending growth. In this Budget, real growth in expenditure is 1.6 per cent over the life of this Government, it’s 1.9 per cent real growth. And that compares to the previous government, where real growth in expenditure was running at 4 per cent per annum. I always find it intriguing that Wayne Swan, he had a target of 2 per cent real growth. He’d beat his chest about it. He was only out by 100 per cent, which for Wayne wasn’t too bad I suppose. But he was very committed to that 2 per cent, wasn’t he Kelly? I think Peter will probably remember. He was very committed, “it will only be 2 per cent”. Missed it by that much - 4 per cent real growth in expenditure. Labor just can’t control themselves when it comes to spending other people’s money - but we can. And expenditure as a share of the economy will fall to 24.7 per cent over the forward estimates, and that’s below the long-run average of 24.8 per cent. And that’s important to keep spending under control, to keep a Budget under control. But there is another set of guardrails. So you’ve got one set of guardrails on our fiscal strategy, which says that spending as a share of the economy will fall. And that’s what our record is showing.

But the other guardrail is the tax speed limit, which we have set as part of the fiscal strategy at 23.9 per cent. Now, as you can see there, it’s not an unreasonable level. I mean it’s not the long-run average, that’s at 22.3 per cent. It’s actually based on the average tax to GDP - and let me be clear here we’re talking about tax not all revenue. It’s the overwhelming majority of revenue, but there is other revenue other than tax. But tax is something we set.

Now, it’s not set at the long-run average. It’s set at a period of Australia’s sound economic management, which was post-GST and pre-GFC. So, that’s the period it’s based on. And as you can see, it hasn’t been exceeded on too many occasions, and where it has, it’s only gone, hovered above that line before coming back.

Now, at the last election, Labor’s position on all the additional taxes; which was negative gearing, which was capital gains tax, which was raising the top marginal rate of tax, which was all of these measures, and increasing taxes on small businesses, increasing taxes on all businesses by the way. All of that was going to take, over the medium-term, the tax to GDP to 25.7 per cent. As you can see from that chart, that is unheard of. I mean Gough’s wildest fantasies never extended to taxing the economy that much. But Bill Shorten’s tax fantasy will become a reality if he ever gets the chance to get his hands on tax. If you don’t control tax, you can’t control your spending. You can’t give Government’s blank cheques on tax. They’ll spend it all. We would never give ourselves that license, and Australians cannot afford to give a blank cheque to unbelieava-Bill. He will spend it all and more. How do I know that? Because at the last election, he was going to take taxes to 25.7 per cent of the economy, and he still had a higher deficit. Labor’s spending always outruns their taxes and

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their taxes can run pretty hard. And that’s the great risk. And that’s the great comparison.

And that’s why the trust can be put in place, because we will control our taxes and we will control our spending. That’s the responsible plan for a stronger economy. And that is what this Budget is delivering.

But I must remind you of what those taxes are; a higher tax on housing, a higher tax on investment, a higher tax on savings, a higher tax on small business, a higher tax on family business, a higher tax on what you earn. They’re all the taxes. They now total $220 billion over ten years. Throw that on the economy, and see what it’ll do. How will your business and the people who depend on your business for their job, their wage, their livelihood, how will that affect the economy that they will live in over the next ten years? But the one I hadn’t mentioned is very important. And that’s Labor’s retiree tax. Now, that’s one they didn’t mention at the last election. And last night Bill Shorten made a whole bunch of rolled-gold promises. But what he didn’t say is that at the last election he already spent all the money from his decision to say, “well we won’t have the Coalition’s Enterprise Tax Plan.

We don’t believe anymore that companies should pay lower taxes.” They used to think that was a good idea, even Paul Keating thought it was a good idea, and they’ve walked away from all of that. They’ve changed their mind on that, just like they’ve changed their mind on tax to GDP speed limits and all these sorts of things. I’m surprised Bill Shorten is from Melbourne - or maybe it’s why - because if every time the wind blows he changes his mind, well perhaps that’s what’s been going on with his views on tax or anything else.

But on this issue of tax, what he has said last night, is he says he’s going to pay for another rolled-gold promise out of reversing the Enterprise Tax Plan. Which means this by the way, we have already legislated tax cuts for small and medium size businesses up to $50 million a year in turnover. So, what he announced last night very clearly was that if he is elected he is increasing the tax rates on small and medium size businesses. They will go back up to 30 per cent on all of these small and medium size businesses. The threshold for a small business of $10 million in turnover, which we increased to $10 million, will go back to $2 million. So gone for them doing a GST on a cash basis, gone for them pooled depreciation, gone for them the instant asset write off. A higher tax rate on small businesses in this country is Bill Shorten’s plan for the economy.

So, he can’t spend that again is my point. He’s already done it. At the last election, he spent every cent of the Enterprise Tax Plan reversal. So, he can’t spend it twice. The way he is actually going to, say he pays for what he announced last night is really the retiree’s tax.

He’s going to rip the tax refunds of people who invested and owned shares in companies, he’s going to rip it off them and say he’s going to give it to someone else, because that’s how Labor works with tax. Our tax plan, our responsible tax plan, is about rewarding and encouraging investment and incentives for people to get ahead. It’s about the economics of opportunity, not the politics of envy and bitterness. We think people should be able to have tax relief without punishing someone else. But Labor’s going to punish people by ripping the tax refunds off people who have just committed the great crime of buying shares in an Australian company, and you’re going to take that and recycle it and try and give it to someone else. That’s theft. It’s dishonest. It’s shifty, and it’s unbelieva-Bill. And that’s why people can’t trust him. Every time you see his lips moving, he’s increasing your taxes. Every single time. Because he has to do that to even try and keep up with the rampant spending

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of what we know as Labor governments. Now, I don’t want to delay it too much longer, Kelly, there are a whole bunch of other slides there, and for those who have a keen interest in other issues; on tax receipts, and spending, and iron ore prices, and all of these things.

I’m sure we can get into all of that. I want to just get to one last slide to remind everybody about what a stronger economy looks like.

This jobs slide - that’s what a stronger economy does. More than 1,000 jobs per day. As a Government, since we were elected, almost a million jobs have been created. That’s what a stronger economy looks like. You want to know what our Budget’s based on? Our Budget is based on commodity price forecasts [inaudible], we’ve all been very conservative on those, which has been recognised not only by us but by ratings agencies. It’s based on, and the analogy works as much for AFL as it does for NRL. It’s based on the 12 point turn-around principle. Someone who gets a job is not receiving welfare, and they’re paying tax.

You stop the other side scoring, in your case a goal, in my case a try - a converted one - and then you go down the other end of the field and you kick one yourself, by getting someone a job. Our Budget is based on the 12 point turn-around principle. Getting people off welfare and into work. That’s what Liberal and National Governments always do, and we’re doing it again. Thank you very much.

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