26 February 2015
Transcript - #2015034, 2015

Interview with David Speers, Sky

DAVID SPEERS:

Joe Hockey, thanks for your time this afternoon. Can I start by asking: do you think there is a problem at the moment with too much foreign investment in Australian real estate?

TREASURER:

No David, we welcome foreign investment in Australian real estate because overwhelmingly it is going to go into new property and that helps with construction jobs such as those for electricians, carpenters, brick layers and so on. So, we welcome foreign investment, but all foreign investors must play by the rules. The previous Government didn’t enforce the rules. We are determined to enforce the rules.

DAVID SPEERS:

But we’re talking here about entirely legitimate and legal foreign investment in new property, aren’t we? So, what are the rules you’re referring to?

TREASURER:

Well, the starting point is that if you are going to buy a new property you need to make a proper application, go through a proper process, you get screened by the Foreign Investment Review Board and then you get approval to go ahead and purchase a property. Now, there are various ways of doing that. Where we have greater concern is in relation to existing residential real estate. Now, foreigners are not allowed to buy existing residential real estate. There has been some evidence – a lot of it anecdotal in some cases, but there has been some evidence that foreigners have been buying, unlawfully, existing residential real estate. We are now going through a process not only of policing the existing rules, but ensuring that there are proper civil penalties including that they can be forced to sell and we recover 25 per cent of the value of the property in doing so.

DAVID SPEERS:

As you point out, housing construction is pretty important to the economy right now as the mining construction boom fades. Do you acknowledge that if you do have this new levy that you’re talking about, at least $5,000,  $10,000 if it’s a property more than $1 million and that’s on top of stamp duties, this is going to be at least some level of dampening effect on foreign buyers?

TREASURER:

No, I don’t accept it David. I mean, if you buy a $900,000 property in New South Wales, you pay $37,000 in stamp duty. You probably pay legal fees and if you are a foreign investor you probably got business migration fees or a range of other fees as well. So, $5,000 is not going to make a discernible difference, but it does give us the resources to be able to make sure we know what is happening in the marketplace. Now, currently, there is no register of who owns what properties and whether they’re foreigners or not. We are setting up a register and we are going to enforce the law.

DAVID SPEERS:

You said that it will raise around $200 million; will all of this go into the new compliance unit in the Tax Office to do this work or will there be some left over to help repair the Budget?

TREASURER:

Well, there may be some left over to help repair the Budget but what we’ve found, David, over the last 12 months is that a lot of the screening processes that myself and Tony Abbott have put in place have involved, in the case of very substantial acquisitions, significant security screening and that has been an enormous cost to the Government. So, we need to recover those costs. Currently, if you are a foreign investor, everything comes for free in the approval process. That is no longer sustainable and the fees will be used to help to offset the costs associated with the current screening process.

DAVID SPEERS:

And can I ask just a final one on this: what do you make of the Property Council of Australia’s criticism? They say this is going to mean when new apartment blocks are being built, they factor in about 20-25 per cent of foreign buyers. So, they’re not going to go ahead with the whole project. That means less supply on the market; that means higher prices for all Australian buyers as well. Do you buy that argument at all?

TREASURER:

No, I don’t. In Singapore and in Hong Kong – governments there charge 15 per cent of the purchase price for foreign investors – 15 per cent. In our case, it’s often less than one per cent. So, I don’t think it’s going to have any material difference at all.

DAVID SPEERS:

Let me move to the Intergenerational Report. You’ve announced that’s going to be released in a week from today. You’ve already warned, Treasurer, that Australians are going to fall off their chairs when they see it; why?

TREASURER:

Well, on the one hand it is incredibly exciting. I mean, obviously we are going to live a lot longer and we should celebrate that. We’re also on the threshold of our greatest ever era as a nation – there’s no doubt about that, but we’ve got to deal with the challenges that lay before us. Under the Government, we’ve come a long way to the point where the Government can start to see some clearer air, start to have some sunshine, if you like, in relation to the Budget. We’ve started the Budget repair task. There’s more to do and if we as a government start to live within our means, we can make sure that Australians over the next four decades have the same – if not better – quality of life than that which we have today.

DAVID SPEERS:

You say some sunshine; hasn’t the deficit actually blown out?

TREASURER:

But because of the structural repair job we’ve undertaken, David, I think it will come as a surprise to many critics just how much we’ve done so far in repairing the Budget – just how far we’ve gone already, and once those critics realise that we’ve done a lot. But there’s still more to be done [inaudible].

DAVID SPEERS:

But are you – just be clear – are you factoring in the measures that still haven’t gone through the Senate like the GP co-payment, higher education reform, when you say that?

TREASURER:

No, we will clearly show what the impact is of already implemented measures. Now, that has taken us a long way in trying to repair the long-term Budget challenge but if we are unable to continue the Budget repair task, then there is no point in the next 40 years where Australia will live within its means.

DAVID SPEERS:

I am just trying to get a read on what this means for the Government’s willingness to continue with those reforms from last year’s Budget and indeed pursue further reforms; if you’re indicating you’ve already come along way, should we interpret that as you don’t need to go very hard anymore?

TREASURER:

No, we’ve laid down a plan, David, and as Scott Morrison, as Sussan Ley, as all they key Ministers have said, we’re ready to negotiate with the Labor Party, the Greens and independents in the Senate to make sure that as a nation we do live within our means into the medium and long-term. We’re not there yet but we’re on the right trajectory and that’s the key point. We’ve been able to turn around a lot of the problems that were left to us by the previous Government but we haven’t turned around all of them and that’s where we are going to need to work together with the Labor Party, the Greens and the independents to make sure that we live within our means into the future.

DAVID SPEERS:

Yet we’ve seen in the last few weeks the Government rule out any change to the GST again, any change to superannuation, any change to negative gearing, any change to the pension assets-test, any change to penalty rates, any change to the minimum wage; isn’t it a reality that the Government is pretty timid on a lot of these reform fronts that you could be looking at?

TREASURER:

Well, no, following the release of the Intergenerational Report next Thursday, there will be a period of extensive consultation with the Australian community. We will then release a discussion paper on taxation and how we can have a taxation system that best meets the needs of Australia’s future. We’ve also got the Budget and then we’re going to have a Federation paper released by the Prime Minister, which will lay down a plan for Australia to rebuild its Federation so that we are at our best to meet head on the challenges of the future. Now, these are big structural changes but it is important that we take the community with us, David, there’s no doubt about it.

DAVID SPEERS:

[Inaudible] white papers and reviews but you’re ruling out a lot of structural changes.

TREASURER:

No, we’re not. We actually have a clear path but we’re going to engage with the community in identifying, firstly, the structural challenges, and that’s what the Intergenerational Report does, and then working with the community to develop the solutions. We believe, we believe, that Australia’s best days are ahead of it but we all need to work together to make that a reality.

DAVID SPEERS:

Now, what about the idea that the Greens have put forward today on superannuation, that you should tax it progressively, so that people like you and I aren’t paying a discounted 15 per cent rate the same as low-income earners; are you open to look at that?

TREASURER:

Well, it’s something that would be considered as part of the taxation paper that I just mentioned, but I do say this, I find it very difficult to take the Greens seriously when they’re putting up different proposals to raise taxes but the Government’s proposal to increase fuel excise, which has been core Greens policy ever since they were formed, is being rejected by the Greens in the Senate. It is a bit rough and it is a bit hard to believe, isn’t it, that they’re really serious about tax reform when they’re rejecting an increase in fuel excise put forward by the Government even in the wake of a massive fall in fuel prices over the last six months.

DAVID SPEERS:

Final question on superannuation, and this is on behalf of a viewer that I spoke to this morning. He’s 78 and he works full-time, he wants to keep on working. He’s healthy and happy doing so…

TREASURER:

Good on him, good on him!

DAVID SPEERS:

Absolutely, and this is the sort of thing you’re trying to encourage. The point he made though is that under the rules at the moment, once you turn 75, you no longer get a tax deduction for voluntary contributions to super. Now, I appreciate most people at that age are drawing down their super, not putting in, but is this the sort of thing you’re going to have to look at changing if you want to keep people working into their 70s?

TREASURER:

Well, this is exactly the sort of consideration that needs to be factored in to future policy because we do want Australians to keep working if that’s what they choose to do, we want to encourage that and it’s vitally important for our future prosperity that Australians keep participating in the workplace – whether they be older Australians or they be, in particular, women coming back into the workforce after having children. So, we are going to have to have a policy framework that is focused on the future rather than the current policy that is focused on the past. We need to reshape all of these policies to meet head on the demographic changes that are going to be a part of Australia’s future and that’s an exciting process because it gives people a bit of certainty, it gives them a bit of predictability around the policies that will influence their quality of life.

DAVID SPEERS:

Treasurer Joe Hockey, we look forward to talking to you after the release of that Intergenerational Report. Thanks for joining us.

TREASURER:

Thanks very much, David, thank you.