20 May 2014
Transcript - #2014041, 2014

Press conference, Sydney

TREASURER:

Thank you very much for coming. Obviously the Budget debate is now heading into a new phase, reflected in new commentary that is obviously taking quite seriously Mr Shorten's decision to oppose nearly $40 billion of savings in the Budget. There have been a number of comments today, including from Standard & Poor’s, that indicate there is a growing awareness that if Bill Shorten is going to behave like a complaints desk for the nation, he is going to abrogate his duty as someone responsible for the mess and someone who has to help fix the mess.

The fact is, Labor is now emphatically opposing $40 billion of savings. This is not a fanciful figure at all. In fact, Labor is opposing $5 billion of the savings that it promised at the last election, including $1.1 billion of savings in research and development tax changes that they proposed in January 2013 to help to pay for their jobs plan. Labor now opposes that saving they took to the last election. They are opposing $2.3 billion of higher education savings that they in fact took to the last election to pay for Gonski education reforms; they are now opposing those. The Labor Party has reversed its position in relation to tax cuts which is a cost of $1.5 billion to the Budget and they are also opposing changes that they proposed before the last election to the Childcare Rebate costing $106 million. Now, so Labor, let's start by focusing on the fact that they're opposing $5 billion of savings that they actually took to the last election. They are now opposing $13.4 billion of savings we took to the last election.

They keep lecturing us about promises made before an election. They are preventing us from keeping our promises and they are also preventing us from keeping their promises as well. The $13.4 billion associated with the repeal of the Mining Tax package means that, together with public debt interest and a range of other things, the total savings that they are actually voting against right now are $20 billion to the Budget bottom line.

Now since the Budget, the Leader of the Opposition has announced he is opposing $3.5 billion of savings associated with the Medicare co-payment, $1.3 billion associated with changes to pharmaceutical contributions, $4.1 billion in changes to fuel excise, $5 billion in changes to higher education, $1.2 billion in relation to social services for people under the age of 30, $1.9 billion associated with changes to Family Tax Benefit Part B and $400 million in relation to pension changes to CPI in the fourth year. In total - Labor's opposing $35.8 billion of initiatives that are going to repair the Budget bottom line, plus the impact of course on the interest re-payment associated with that increase in the debt if those savings are not identified, which effectively means that it is around $40 billion.

Now, it is one thing for Labor to be the complaints desk of the nation but they also have a responsibility because they have the numbers in the Senate to block the initiatives of the government and Bill Shorten now needs to understand that he has a responsibility as Leader of the Opposition to do what is right to help to fix the mess that Labor created, because if he consistently opposes major savings initiatives, he now has got to identify where his savings are. It is not good enough to oppose the measures that we announced in the Budget and to oppose the measures that we took to the last election and to oppose the savings measures he took to the last election. He actually has to provide an alternative. Otherwise things will start to fall apart, and why? Because there is a cost associated with not fixing the Budget. It means we will end up with higher interest rates and higher interest charges because ultimately, if the Government never gets back to surplus, the net impact on the bottom line is such that the interest bill keeps rising, Government keeps borrowing from the community and that in turn put upward pressure on interest rates.

It is also the case and it is an early warning, it is not a declaration, but it is an early warning from Standard & Poor’s, that they are looking closely at the passage of legislation through the Senate. If there were to be a downgrading of Australia's sovereign credit rating it would have an impact on every household that borrows money, either through a mortgage or credit card. The sovereign rating, the Commonwealth Government rating, flows through directly to the costs of borrowing by the banks and that flows directly through to every household and every business. It also flows through to the states. So, I would say to Bill Shorten, I say to the Independents in the Senate, think very carefully about your actions because ultimately if you decide to turn down savings and you offer no sensible or credible alternative, it will have an impact on every household in Australia through higher interest rates and higher taxes down the track.

REPORTER:

How many of these measures can you bundle together in the supply bills and essentially have then made impossible or very difficult to block that way?

TREASURER:

Very few. The Government through the supply bills can reduce expenditure in certain areas but almost all these initiatives require legislation; separate legislation. Now the fact that the Opposition created the mess and now doesn't want to help fix the mess, illustrates the fact that they have no solution. If they are arguing that Australia should always have deficits and always have increased debt, then let that be their economic plan, but they can't run around on the one hand saying that they want to be credible and on the other hand actually oppose everything that we are proposing to fix the Budget mess.

REPORTER:

Mr Hockey there has been a fall in consumer confidence measured by ANZ and you’ve just said things will start to fall apart. You're talking about $30, $40 billion in saves-spends in cumulative Budgets approaching $2 trillion. Are you at risk of overplaying the concerns and having a macroeconomic impact while you (inaudible)

TREASURER:

Not at all because a lot of the initiatives are structural savings, they are structural savings. So what Labor did was, in the medium term they built in an assumption that they would have a limit on growth in expenditure of 2 per cent in real terms, that is what they built into their assumptions. That is how they assumed they would get the Budget back to surplus. Of course we found out that the growth in expenditure that they actually left was 3.7 per cent. Now, with all these changes that we have made, we have brought it down to about 2.6 per cent. We still don't get it down to 2 per cent growth in expenditure each year. Now if they are going to make it harder and not easier, it is going to have an impact, a negative impact and the pain associated with fixing that negative impact is going to get greater and greater over time. The savings that we announced in the Budget are in the main, structural and they deliver the real dividends over a 10-year period. So if Labor opposes these structural savings, inevitably the pain associated with trying to fix the Budget in five, six or seven years will be far greater.

REPORTER:

Mr Hockey how can you demand consistency from Labor on its previous commitments when you reversed on so many of your own commitments at the Budget?

TREASURER:

Well, I don’t accept that question at all. I don’t accept the premise of that question. The fundamental point is, we went to the last election upfront with the Australian people about, for example, we are going to abolish the Schoolkids Bonus. Hard politics, fully accept that. But we were very upfront; in fact, Tony Abbott said in his Budget Reply speech in the Parliament, ‘we cannot continue to pay a Schoolkids Bonus out of borrowed money because the mining tax has raised no money’. So we went to the last election making that promise. Bill Shorten is now keeping us from keeping our promises. He is so outraged about what he believes to be our broken promises he is doing everything he can to stop us keeping our promises; such as repealing the Carbon Tax, such as repealing the Mining Tax. Such as cutting back on some of the waste and expenditure that Labor left. His faux outrage about broken promises means nothing because he is preventing us from keeping the promises we made at the last election.

REPORTER:

But it’s not really washing with voters because you did say there would be no new taxes, and now you have increased some taxes and introduced new taxes in the Budget.

TREASURER:

Well, that’s your commentary, your political commentary, our bottom line is we said: ‘taxes would be lower under us than under Labor and the Budget papers actually reflect that to be the case.

REPORTER:

Mr Hockey, isn’t it inevitable that we are going to see a rise to the preservation age given that Australians are living longer and we do have a structural Budget problem? And is it actually doing people a disservice by not starting that conversation earlier?

TREASURER:

No, I think we have enough conversations going at the moment to be honest, and we are honouring, absolutely honouring, our commitment that there will be no changes, no adverse changes to superannuation in this term of government; we’re honouring that commitment. Obviously there’s an intergenerational report that will come out at the end of the year which quite properly, as it has done under previous governments, will look at the long term, even the very long term challenges associated with things from, such as, government expenditure or how do we fund our retirement savings. That’s the appropriate mechanism to consider the issues, have a fully informed debate, but as we have consistently said, we are keeping our promise not to have any adverse changes in superannuation in this term of government. If there’s any changes they will be, obviously, on the horizon.

REPORTER:

Senator Ian McDonald has just publically criticised your lack of consultation with him and the Australian people, how do you feel about that kind of backlash within your own party?

TREASURER:

Well, firstly, I did listen to that interview. I think he was highly critical of Labor for leaving a mess. Obviously, we would have liked to have spent another two years engaging in consultations with the broader community about what we have to do to fix the Budget, but we need to fix the Budget now. We need to start now. We have laid down a plan, that in fact, Senator McDonald indicated that he strongly supports. A plan that is focussed on fixing the mess that we inherited. Now, if we delay it the costs associated with fixing the plan are going to be far greater for fixing the mess, they are going to be far greater than they are at the moment and we’re moving now, because we must.

REPORTER:

What would you say to Ian McDonald about the GST, the base being broadened?

TREASURER:

Well, we have said we are not going to change the GST. If there are to be any tax changes along those lines they will go to the Australian people at the next election.

REPORTER:

[inaudible] are you surprised with how quickly it moved down and what does it do to your Budget bottom line?

TREASURER:

Well, commodity prices obviously are relatively volatile. The iron ore price falling is linked to, what is suspected to be, an oversupply in China. The mining and resources industry has been incredibly important for Australia over the last decade. It has helped to deliver a strong economy during adverse times. Over the last 12 to 18 months you have seen 12,000 jobs go in the coal industry and even though iron ore production and export is very strong and volumes are strong in that, and still relatively so in coal, the fact is that you can’t keep banking a boom in prices for the long term. So, that is all the more reason for us to get on with fixing the Budget and that is why we have to deliver the structural savings now in the Budget, because the assumption that there is going to be windfall revenue into the future that is going to bring the Budget back to surplus is irresponsible and that is what Labor kept doing. It kept saying it would raise, you would get the dividend out of all these new revenues from a range of different sources. Even Wayne Swan is still running around saying the Mining Tax is a great idea and that there is going to be a windfall flow of funds in the Mining Tax. In fact, we’re almost at the point where we are paying back the miners more money out of the Mining Tax than we actually have collected in refunds. We’re actually giving them that. How can you get to that point where you have a tax that is almost to the point where you refund more to the taxpayer than they actually pay you? That is the great legacy of Labor. The problem was they committed over $13 billion of expenditure against a tax that hardly raises any money. So I say again, we are about fixing the mess and if commodity prices come off, well, the best way to reduce our vulnerability today is to ensure that we don’t rely too much on higher prices to deliver the revenue that will help to get the Budget back to surplus. We have to make structural savings in relation to expenditure.

REPORTER:

What’s your personal view on what age Australians should access their super or pension?

TREASURER:

Well my personal view doesn’t matter at this particular point. What matters is policy of the Government and I say again, we are not changing super in this term of Government. We have said that before and we’ll say it again. I think, you know, any suggestion that there’s this new wave of policy reform in superannuation happening at the moment is wrong.

REPORTER:

You did say last night that it’s on your mind.

TREASURER:

Sure, superannuation is on the mind of just about every Australian in one form or another.

REPORTER:

If you are looking at structural reform then why, two questions, why not consider it in the Budget and just have structural reform around super rather than pensions.

TREASURER:

Well, we said there would be no adverse changes to superannuation in this term of Government and we stick to our commitments.

REPORTER:

There were also no changes to the pension  before the election as well.

TREASURER:

That’s right and there are no changes to the pension system before the next election.

REPORTER:

Okay you have announced changes to pension indexation. If you were to consider structural changes around superannuation what should they be? Should they be changes to the taxation treatment for high income earners?

TREASURER:

Look, I’m not getting into speculation about that. Any other questions?

REPORTER:

Have you hears about the situation in Thailand. Lots of Aussie families are worried about Martial Law being declared there.

TREASURER:

Oh look, naturally enough, we are obviously concerned about what’s happening in Thailand. We urge Australians to contact diplomatic officials, Australian diplomatic officials in Thailand and to be in contact with their families and take good care and to heed the travel warnings provided by the Department of Foreign Affairs. Thanks very much.