13 March 2015
Transcript - #2015055, 2015

Q&A Session, Chatswood Chamber of Commerce Lunch

QUESTION:

Thanks. Thanks for giving me this opportunity to speak. We’ve known each other from the [inaudible] and we’re…

TREASURER:

Just hold it close. That’s it.

QUESTION:

I’m a bit nervous.

TREASURER:

Don’t be, there’s only all these cameras around.

QUESTION:

[Inaudible] Talking to a Minister, I have never done that. So, one of the things that I would like to make really [inaudible] what had happened, especially from my experience, that now mathematics and IT has come in [inaudible]. What it means is that we need people who are really strong in mathematics, whether it is operations for [inaudible] or engineering or whatever, and with experience of the [inaudible]. They need to now go back, relearn their mathematics, and then they’ve left those [inaudible] artificial intelligence [inaudible]. [Indistinct], see that there is a big gap in there. The young people [inaudible]. Is it possible –  is there a way to train these people? The biggest problem is that they have to give their time, they will have to – it’s not a part time job, and they get something like X – something like, you know, some incentive by which they get retrained, so that they can get into what is the real wave in technology.

TREASURER:

Yeah. We have – again, last year, we announced that we were extending the HELP loan scheme that applies to university students. We’re extending it to vocational education. That’s hugely important, because people that went to university used to get the opportunity to undertake – have that education, but that was paid for with a deferred loan scheme. So, we extended that across the disciplines. Now, provided courses are fair dinkum, and they do help with that process, it’s worth looking if it can be further extended, particularly on the basis that people will be able to work and learn at the same time. In part, it’s also about a more flexible attitude from employers, which has got to be part of the equation as well. So, that’s potential for the partnership to develop between employers and government, in ways that we can extend our balance sheet to help to lift the skills level of the workforce to address some of these productivity issues.

QUESTION:

Danny Dreyfus from [inaudible] in Chatswood, I’m an investment adviser; I don’t think I can get any closer to the Treasurer than I am now.

TREASURER:

You wouldn’t.

QUESTION:

The question’s about longevity, workforce and the like. You pointed out the grey army working longer, which means those people have to contribute to their savings otherwise they’re going to be on the Government’s payroll longer, which means they’re going to have to be able to contribute into super beyond 65, which also means that they should be allowed to contribute earlier on, and the importance of contributing in the early days of your working life is critical, because it stays in the super structure longer and compound interest works. So, the proposal to allow people to dip into their super in their early days to fund first home buying I think is flawed. Home buying is where you’ve all seen, especially if you live in Joe’s electorate, house prices have been soaring, there’s a supply-demand imbalance everywhere. You’re fuelling increased demand if you allow people to dip in to their super early to fund the purchase of their first home. Surely the alternative, or the solution about the pricing bubble – the affordability, is to remove some of that demand which is – in my personal view – about the lax control of what you’re buying of property – residential property; and secondly increased supply, not fuel further demand by allowing people to dip into their super very early to find a deposit. That brings more buyers into the market.

TREASURER:

Well, that’s a good point. This proposal’s been around for ages, so I’m bemused that it’s suddenly my proposal, particularly given that it came from various real estate groups as well who actually have done some of the more considered analysis. The reason why it was initially raised was because schemes operate in Canada, in Switzerland, in Singapore, and they have different purposes and different schemes. Quite obviously, there is a concern that first home buyers are finding it hard, given the multiple, today, compared to when you bought your first home and when I bought my first home, of income necessary to buy your first home on the market. Now, the Murray inquiry, initiated by us, said you have to have a purpose for the superannuation system. The assumed purpose has always been retirement income. That remains the case. But having said that, if we are living longer, and assuming that people will draw down from the age of about 55, as you know you’re a financial planner, aren’t you? You said? Close, advisor, sorry. People can draw down from the age of around 55, from memory, on their super. The question is, should super be a more flexible product for people if they’re going to live a lot longer? It comes back to the stereotype that if you hit 65 and you’ll be able to retire on good income, but we’re all living longer. So, have we got enough savings? Now, I’m open to proposals –  we’re open to proposals, but if the overwhelming view of the community is, ‘no, let’s quarantine super for retirement savings’, we accept that. We accept that. But the interaction between the superannuation system and the aged care and the aged pension system needs to be further considered in that context, because at the moment, four out of five Australians over the age of 65 are accessing the age pension. In forty years time, four out of five, exactly the same ratio, will be on the age pension [inaudible] there’ll be more people on part pension than there are today. So, the question is, is the system working for the future and I think it is a legitimate question to ask. I know financial planners and their clients ask that every day. Do you have enough money in your super to be able to properly sustain your quality of life given we are living longer? It is also the case that if people are going to work longer, they’re going to dip in and out of careers, and they’re going to have different training during those periods when they’ve dipped out. They’ve still got the same bills to pay – the mortgage bill, the electricity bill, the gas bill – but they’re expected somehow to fund their retraining. Now, part of it might be the government loan scheme, but also, the question is how do they keep that quality of life when they’re exiting for two, maybe three, maybe four years? And they might do it two or three times during their longer life. How do they maintain that quality of life during that period? That’s part of this conversation. And we’d encourage people to express a view.

QUESTION:

Thank Mr Joe Hockey. My name is Amy, and I’m part of the board of Chatswood Chamber of Commerce. Thank you for your insight. It looks like I’m going to work for the next 40 years.

TREASURER:

Only if you choose to.

QUESTION:

Only if I choose to. What I’m interested to know is Australia’s position within the Asia-Pacific’s identity. With the next 40 years, is Australia just going to be just Australasia – meaning Australia, New Zealand, and the South Pacific region? Or are we going to be Australia as in Asia, Australia in – joining the OECD, and be closer to Singapore, Hong Kong – form some alliances? Because that will be very interesting.

TREASURER:

Well, Australia is part of Asia now. I mean, the world’s divided in three time zones: the American time zone, North and South America, the European/African time zone, and then the Asian time zone. Global businesses are run on three time zones, basically. Increasingly, goods and services are being traded over the internet, whether it be - software downloads which, as consumers we use on our phones, or be it, you know, in purchase of goods, in retail, whatever the case. But in the main, the world – you find it hard and harder to disrupt the time zone activity, because there aren’t many people that really are very enthusiastic about living through the night and sleeping through the day.

So, because the world is in three time zones, and we’re in the fastest growing region in the world, and we’re in the part of the world that has the biggest population, our opportunities are huge. Seventy per cent of the Australian economy is services, yet it represents less than 20 per cent of our exports. So, it is a huge area of growth; aged care services, education services – and we’ve seen that over time – obviously tourism services and so on. So, mining and resources represent around 10 per cent of our economy but well over 50 per cent of our nation’s export income – iron ore, coal, gas, and the like.

So, the question is, how do we get into the Asian market, which is in our time zone? We’ve signed three new free trade agreements, which are extraordinary agreements that are going to change Australia’s future for the better. For example, there are few, now, restrictions for an aged care provider in Australia to expand into China. China has one of the most remarkable demographic bubbles in the history of humanity, as a result of the one-child policy. It’s a nation that is going to increasingly be screaming out for aged care services. Australia has a sophisticated and very capable aged care sector. That’s just one area. Health care services, providing – we’ve got some of the best doctors and medical researchers in the world. That’s one of the reasons why we are determined to proceed with the Medical Research Future Fund. This provides huge export opportunities into Asia, and remarkable capacity to get research and innovation to market in that region. The list goes on – education services and so on. This is the area of growth; real estate services, architectural services, because increasingly they’re going to want to have bigger homes, better quality furnishings, the list goes on. Legal services, accounting services, engineering services. The demand is going to be absolutely phenomenal, as you see the emergence of this massive middle class that is going to want exactly the same as we want – better quality lifestyle, better education, clean air, quality food, and so on. This is our destiny; it’s also our prosperity. And because we’ve signed these agreements with Korea, and Japan, now China, and we’ve got the best deals possible out of those countries. They represent around the majority of our exports now, but there’s going to be a surge. When you start to see India come on board, and surges [inaudible] economy, the first major shipment of iron ore went to India just two or three months ago. Imagine what it’s done for Australia with China; think about what the potential is with India if it continues to grow. In the next few years we’ll be the biggest exporter of gas in the world. We’re a massive exporter of energy, be it gas, or coal, or uranium. Increasingly, as you start to get renewable technology up and running, we’ll have a huge role to play in that as well. So, we are part of Asia whether they like it or not. I think they really like it because they’re very embracing of all of our attempts to negotiate these agreements, break down the barriers.

QUESTION:

Honourable Joseph Hockey MP. Thank you for putting the cat amongst the pigeons regarding superannuation being used to facilitate first homebuyers.

TREASURER:

I didn’t put the cat amongst the pigeons. There was a whole litter of kittens out there already.

QUESTION:

Having brought it back into discussion. Surely if you look closely at the Canadians and Singaporeans have been doing, especially in Canada, if it’s a [inaudible] you want to buy in Sydney, you want to use super, you buy [inaudible] Can I have your thoughts though at the other end of the spectrum? Here we have in greater Sydney, this classic situation of asset-rich cash-poor retirees, sitting on great wealth in their real estate, but can’t facilitate and sell it because they’re scared they’re going to lose the pension.

TREASURER:

Yep. Good question. Well it is an issue, particularly in this area, that there are older Australians who have the traditional family home, have a lot of capital tied up in it, but are worried that they’re going to lose access to the age pension, and particularly the medical benefits and concessions that go with it, should they sell and then qualify under the assets test. It’s a very good question. I’ll leave it at that. It is also – can I just say this again in relation to super for first homeowners: if the community resolves that the superannuation system is to be used only for retirement purposes, so be it, but please, let us have a conversation at a national level that engages in a proper understanding of what the superannuation system should do, but also, we need to find a solution to help in relation to first homeowners. Now, some people say supply is the issue. Supply is part of the issue, but we’ve seen a significant surge in the amount of supply in housing in Australia in the last 12 months, but, it is quite concentrated, and it is still the case that you have rising house prices, particularly in a lot of major metropolitan cities like Sydney. So, given the multiple of annual income you need to get into your first home is now far greater than it was when we bought our first home, and certainly much greater than it was when our parents bought their first home, we need to have a proper discussion about this. Obviously in the New South Wales election there’s been talk about staggering stamp duty over a period of time. From memory, and you’ll be able to tell me probably, I think stamp duty on a $900,000 property is around [inaudible] For a $600,000 property stamp duty would probably be around 25,000? That’s a lot of money, on top of the deposit that you have to have, and previously the banks have lent on 110 per cent - I think those days are gone. So, how do people save that amount of money when they’re also paying off their education expenses? It’s a big ask. So, we’re all open for suggestions. We need to work with state governments, obviously, on land release, but it’s also the case, it’s not just about land release, as you know around here, it’s about going up, not just extending out, because for many people, as it was for me, first home was a unit. That’s increasingly the case in many metropolitan areas, capital cities. So, we’ve got to think about the changing nature of expectations as well. One of the reasons – just to go back to the earlier question – foreign investment is good for real estate, provided it goes into new real estate because that means there are construction jobs. If you look around here there are cranes, and there are buildings that have gone up everywhere; that has employed a lot of people in the local community, putting up those buildings. There’s been considerable offshore demand. Doesn’t mean we can’t do more, and we should, to increase the [inaudible]

QUESTION:

Yes, [inaudible] I would have thought in most cases that [inaudible]

TREASURER:

It wouldn’t be enough. Exactly.

QUESTION:

So, I mean if the Federal Government decided to subsidize the state governments, in lieu of…

TREASURER:

We do.

QUESTION:

… [inaudible] in other words give them, you know, new home buyers, perhaps a [inaudible] to purchasing a home may well have helped rather than [inaudible], but you also have the great revenue raiser of GST, and of course that’s been left off the table to a certain extent because one, it’s been provided by the State [inaudible] but it’s also an incredibly good revenue raiser [inaudible] and we’re happy to pay it [indistinct] as well. So, I mean, think the GST represents a difficult one for the Federal Government, of course you do have Premiers who indulge in making the decisions that [inaudible] all sorts of issues with it as well, but I still think that should be something [inaudible].

TREASURER:

We will be releasing a taxation discussion paper in April. It comes out of this Intergeneration discussion paper as well. It takes into account the Federation White Paper and discussion paper that the Prime Minister put down about restructuring the Federation. You’re right, we increase the GST, state governments get the money, the Federal Government doesn’t, but it also requires the universal agreement of the state governments. That means that the Labor Party and ourselves have to agree to increase or change the GST. I don’t think that’d happen. I don’t think every state Premier would be putting up their hand and saying we want to increase the GST [inaudible] per cent. I don’t think that’s going to happen. So, from a practical perspective, it is a debate that is unlikely to happen, and unlikely to be implemented if it were chosen to but there are a number of good reasons at the moment why you wouldn’t change the GST; one is that we’ve had very flat increases in wages in Australia, because the mining boom’s been coming off. Our nominal income hasn’t grown the way we were expecting it would. So, households have been under some pressure. Lower petrol prices, reduced interested rates have helped in that regard. Tax cuts that we delivered have actually helped in that regard – putting more money in peoples’ pockets but we’ve got at the moment unemployment too high; it’s not the time to increase prices for anything, which is effectively what the GST is. Now is not the time to do that at all. And if you were to do it you’re meant to give significant compensation, particularly to lower-income households, because they’re the ones that consume the most and as a proportion of their total household income pay the most GST. So, given that, you would need to properly [inaudible] at a Federal level and at the moment we haven’t got the financial capacity to go down this path [inaudible] proposed changes in GST. The final thing is technology and global free trade makes me wonder whether there will be a GST; anywhere in the world, indirect taxes of any sort anywhere in the world [inaudible] because of global commerce and the transmission of goods, and increasingly services over the internet by suppliers based offshore is increasingly undermining the indirect tax base of any country. The same applies to company tax, which makes me wonder if company tax will be around in 40 years’ time because increasingly, major companies that are multinationals, supplying particularly intellectual property, can do it from low-tax jurisdictions. And we might be able to work together as I was driving very hard at the G20 last year, cracking down on multinationals when they’re operating out of low-tax or no-tax places. And we’re all working together at the G20 to crack down on that but it doesn’t stop other countries offering tax breaks of 10 per cent, compared to our 30, and increasingly that differential comes into play. Particularly if by pressing a button you can [inaudible].

QUESTION:

Joe, I think the message from your presentation is that we need to make some hard decisions. And [inaudible] an infrastructure levy [inaudible] I can understand that can be sometimes a difficult task. Can you give some insights about how you might bring – [inaudible] aspect of the journey with you to make sure that these changes are implemented?

TREASURER:

Gail, it’s a good question. I mean this is part of the process. It’s about having a conversation, Town Hall meetings, Chamber of Commerce, Rotaries, wherever it might be, and media interviews, but it can’t be just one person or just a Ministry. It has to come from within the community. It has to come from all of you; your workplaces, your family dinner table or whatever the case might be. This is where we need to broaden our thinking. Our everyday lives are very accommodating with change. If we look at the use of mobile phones, you look at the way we do electronic transfers in banking. How many people walk into a bank these days? Unless, in some cases, they’re trying to rob it, but, I mean, really, it’s – bank branches are financial services, advisors in a sense, rather than transaction-based, and there has been a sea change in everything we do. If you look at mail now, fewer and fewer companies are using regular mail; increasingly emails. So, we’re changing in our own lives, but somehow we long for all the structural things provided by government to say the same. Well, the only way we can stay the same is to change. The only way we can stay the same, have the same quality healthcare, same quality education, same national security, same environment, the only way we can stay the same is if we change. And if through that change we can make it better, that’s terrific but the status quo is not an option, because the world is moving much faster these days than it did a year ago, five years ago, certainly 40 years ago.  So, the first thing is that we recognise that our daily lives are changing and therefore government needs to change. Politics needs to change. Politics is moving much faster, much faster than ever before. When I first became the Member for North Sydney, when someone turned 100, I’d go round and visit them and present them with flowers. Now, I just send them a letter. And why? Because so many people are turning 100, and in due course, I’ll send them an email –  ‘well done.’ But it’s changing. You know, there was no social media of any sort really 10 years ago, certainly no Twitter and no Facebook, things like that. When the Howard Government was in, they never had that 24/7 news cycle. The story in the morning is obsolete by the afternoon, let alone going back to the glory days that people talk about of reform, under Keating and Hawke, when you’d have a story and it’d last two or three weeks. Now, journalists – the media, community in a sense, becomes impatient after 24 hours on the same story – 48 hours. So, it’s a much harder cycle to get to be structurally reformed. So, really it means the community has to own it. They have to own it. One of the things [inaudible] was you had a referendum, in relation to – [inaudible]. The Intergenerational Report and these conversations are part of the community owning the future, because no one standing on a soapbox in Canberra is going to deliver with a few pithy words the future of Australia. It has to be owned by the individuals in the community.

HOST:

I think we are done on questions.