16 July 2014
Transcript - #2014061, 2014

Interview with David Speers, Sky News, Canberra

SUBJECTS: Budget, FoFA

DAVID SPEERS:

Treasurer Joe Hockey, welcome to the program. Can we start on the Budget? You said this morning, 'if the Senate chooses to block savings initiatives then we'll need to look at other savings initiatives that may not require legislation'. What are you talking about there?

TREASURER:

Well, let me start by saying David, that we have laid down the very best plans to repair the Budget. Now, if the Labor party has an alternative they should offer that up because 12 months ago they recognised that the Budget needs to be fixed and that's why they had a number of initiatives in last year's Budget. We want the Labor party to not only support our Budget, we want them to support their Budget from a year ago. So far they're opposing just everything. So, if the Labor Party, with 25 Senators, opposes absolutely everything and deals itself out of discussions on the Budget, and the Greens, with 10 Senators, oppose absolutely everything and deal themselves out being involved in policy making then we have got to look at alternatives, which includes the independents and PUP representatives and we have got to try and work through the challenges we have.

DAVID SPEERS:

OK, but if they all oppose the key measures which they are saying they will, what do you do? What non-legislative measures can you take?

TREASURER:

Well, for example, the most significant individual item in the Budget is a savings measure, it's a reduction in foreign aid. Now that does not require legislation – specific legislation, we just have to reduce the expenditure there as part of our Budget savings. We are absolutely determined to repair the Budget because David, if we don't then the pain for the Australian people further down the track will be much greater. You repair the roof of the house while the sun is still shining. That's what we are endeavouring to do so that we can create more jobs and a better and more prosperous environment into the future.

DAVID SPEERS:

If you follow that logic about where you can reduce spending, can I ask you directly, will you make deeper cuts, then, to the public service?

TREASURER:

Well, you can go through individual items, but I'm not going to do that because as it stands, a lot of our initiatives still need to be legislated and they take place over time, David.

DAVID SPEERS:

Is this the sort of thing you're threatening? Reduced spending on areas like public service, like what you give the states for health and education and disability services?

TREASURER:

Well, there's a range of things that you can undertake, I mean it is a very large Budget, but what I am saying to our political opponents, and saying to people who might sit in the middle in the Senate, there is no easy solution here. If you disagree with us, and you're perfectly entitled to do so, then you need to provide alternative savings to make up the shortfall in the Budget. Because we are absolutely determined and it is the common interest to fix the Budget, and that is certainly our core election commitment, to fix the Budget, but we're not going to be deterred from getting on with that job.

DAVID SPEERS:

I just want to be clear on what you are threatening here: if the Parliament said it doesn't back what you put on the table, then there are spending areas including health, education, disability, public service, could be in your sights?

TREASURER:

Well David, there aren't any choices. We've laid down a plan, an Economic Action Strategy that delivers long term sustainable government budgets. Whether they be Labor or Liberal. We've delivered a plan. Now, if our political opponents choose to undermine that plan then we have to make alternative decisions. Now, we can only lay down plans we believe are credible and are likely also to pass through the Parliament. For example, how extraordinary it is that the Greens are opposing an increase in fuel excise. That is one of the most bizarre decisions I've seen from any political party. The Greens have really led the field and they're just saying no to everything,  so they're becoming absolutely irrelevant. Even with ten Senators the Greens have made themselves totally irrelevant. They seem to be completely contradicting their own policy principles. Now, I know the Labor party often contradicts its own principles but the Greens are a surprise to me. Well, it was unexpected, so that means that if we don't get the revenue in that position and we are still going to spend the money on roads and we are still going to spend the money on infrastructure, we need to find the money from other areas and we'll certainly be looking at that if our fuel excise measures fail to pass.

DAVID SPEERS:

Well, you did see a change of heart from the Palmer United Party on the Financial Advice changes. It was only last week, I think, that he said 'you could stick these changes up your…'  well, he said you could stick them. Are you encouraged that he's had an about face on this, Joe Hockey?

TREASURER:

Well, it's not just Clive Palmer, I mean obviously it's been a very fruitful negotiation with Mr Palmer and with the Senators from Palmer United. Don't forget, Bill Shorten said before the Budget that there was no way he was going to support a deficit levy and then after the Budget he said he would, and he did.

DAVID SPEERS:

Positions change.

TREASURER:

Yeah, they do change and what we've got to do is, look David, I fear I've been around nearly two decades in this place, I've seen lots of confected crises about Budgets, there is no crisis with this Budget, it is a simple fact that we are working carefully and methodically in putting in place measurers that are going to fix the Budget and strengthen the economy and we're doing that. It'll take time, and we're patient. But the only way to do it is to have prior [inaudible] engagement and I would urge everyone involved to come to the table. We're prepared to discuss these things, but the automatic response of Labor and the Greens at the moment is to say, 'No'. Well, then they leave us with few alternatives.

DAVID SPEERS:

I want to ask you about these financial advice changes. Your mother-in-law is one of those who lost money thanks to dodgy advice from the Commonwealth Bank. The Government is now going to allow financial advisors to, once again, receive bonuses for directing clients to bank products. Now, is that really in the best interests of consumers?

TREASURER:

Well, it's a lot more than that, David, and as the Murray Inquiry in its first report released yesterday identified, it is not necessarily the case that more regulation, more red tape and more forms deliver better outcomes for consumers. So, we have responded to the unholy mess that Bill Shorten introduced just over a year-and-a-half ago in relation to the Future of Financial Advice. And what we focussed on was having better regulation that comes at a lower cost to consumers rather than having more regulation that fails to do the job.

DAVID SPEERS:

It is going to mean that advisors can get special bonuses for directing clients to bank products, now it may not be called a commission, but is there really any difference between a bonus and a commission in that situation?

TREASURER:

Well, the bottom line is, the great fear, and I've been involved with this for a very long time, and it started as a failure to disclose commissions that were received from financial product advisors to financial advisors when they steered a consumer into a product. Now we, obviously, require commissions and various other payments to be properly disclosed to the client and what we're looking for is a regime that delivers transparency and accountability. Now, Labor tried that, they introduced 16 amendments to their own bills in the Parliament to try and do it, and Bill Shorten had five different explanatory memorandums for his own Bill, which is unprecedented.

DAVID SPEERS:

Consumers care about getting good advice.

TREASURER:

You're absolutely right. I think what was interesting that just came out of the Murray – the interim report of the Murray Financial Systems Inquiry yesterday was 'how do we deliver better, more understandable advice to consumers'? That's the issue. Now, in the case of the Commonwealth Bank, there was outright unlawful activity. It was unlawful. Unlawful under laws. Now, no amount of law is going to stop people committing crimes.

DAVID SPEERS:

But things like bonuses, do things like bonuses encourage financial planners and advisors to push the boundaries more?

TREASURER:

Geez, David, I mean I don't know how you're remunerated at Sky but I assume that bonuses are a part of the equation as they would be in a number of businesses. So, if you perform well you get paid bonuses.

DAVID SPEERS:

Well they're not, for the record.

TREASURER:

[laughs] well they should, David, they should. You do a fabulous job.

DAVID SPEERS:

OK, it is in this area that concern has been raised about financial advice being linked to the commissions or bonuses that advisors can receive.

TREASURER:

Well, I don't have any particular issue with people being properly remunerated for the job they do, as long as it is transparent and the issue is, is there an obligation to act in the best interest of the customer? Now, we are satisfied that that remains the case and it is the case and it should be the case. A financial advisor should be putting the interest of the customer first and if they are receiving any payment at all from a financial product provider, that should be disclosed to the customer.

DAVID SPEERS:

I want to ask you about the Carbon Tax, Treasurer. Do you remember supermarket prices going up? Because Coles and Woolies are saying they didn't go up when the Carbon Tax came in and they won't now come down.

TREASURER:

Well, David, the fundamental point is the whole purpose of the Carbon Tax was to increase prices. That makes [inaudible] so bizarre.

DAVID SPEERS:

But did it?

TREASURER:

Well, unquestionably it did. In relation to electricity prices and gas.

DAVID SPEERS:

What about supermarket and airline prices?

TREASURER:

That flows through. I mean, it flowed through to refrigerants. I mean, I remember going to an independent supermarket in Atherton in far north Queensland and they had pointed out that they were increasing prices because the cost of refrigerants had dramatically increased.

DAVID SPEERS:

So that comes down now?

TREASURER:

Well, prices should come down, and as the head of the ACCC Rod Sims said, 'if prices went up as a result of the Carbon Tax, they will go down'. Now, let me just add, in several cases businesses had to absorb the cost, but ultimately that was temporary because, of course, businesses when they absorb the cost, they, at the end of the day pass it on in one form or another to consumers. So, the airlines, being a classic example, it was a hit to the bottom line of Qantas and Virgin, to their bottom line, they absorbed the cost because of the extreme competition in aviation. But that competition has changed now and ultimately they will be passing it on to consumers in higher ticket prices instead of shareholders copping it, therefore there is no need to pass it on now to consumers in higher ticket prices.

DAVID SPEERS:

I guess what I'm asking is, was the price impact overstated? If the airlines, supermarkets didn't actually put up there prices, was there ever this $550 increase that you've so often talked about and are we really going to see that saving when the Carbon Tax has gone?

TREASURER:

Well, the previous Government, David, said it. The previous Government, when they introduced the Carbon Tax, presented Treasury modelling that identified this was the impact of the Carbon Tax.

DAVID SPEERS:

But was it wrong?

TREASURER:

Well, I don't price check every single item, and I know it's going to come as a surprise even though I do do the shopping at home, but I don't price check every item and then ring up Coles or Woolies or my independent supermarket and ask them what the variables are. But having said that, there is no doubt that because you're taking a tax that raises about $8 billion a year out of the economy, and leaving in the tax cuts that people received as compensation for that $8 billion, then people are going to be better off. The cost of living for every day Australians is going to come down as a result of abolishing the Carbon Tax.

DAVID SPEERS:

$550?

TREASURER:

We are the only political party absolutely committed to reducing the cost of living for everyday Australians and the best way to do that is to support the abolition of the Carbon Tax.

DAVID SPEERS:

It will be a $550 average saving?

TREASURER:

Well, that's the average. That's the best advice we have from Treasury, that was included in our explanatory memorandum to the Bills, and that's the advice that was given to the previous Government.

DAVID SPEERS:

Treasurer Joe Hockey, thanks so much for your time.

TREASURER:

Any time for you, David. Now, I'll get on to Sky about making sure you get a bonus.

DAVID SPEERS:

Appreciate it.