24 June 2015
Transcript - #2015150, 2015

Interview on PVO Newsday, Sky News, Canberra

PETER VAN ONSELEN:

Joe Hockey, thank you very much for joining us. It must be hard to keep the grin off your face over the last two weeks, getting your fuel excise through…

KRISTINA KENEALLY:

Pension reforms…

PETER VAN ONSELEN:

You name it.  Kristina Keneally, former Labor Premier jumping in to give you compliments.  The Labor Party on the ropes, how do you avoid this turning into hubris?

TREASURER:

Well it certainly won’t turn into hubris because we have a Budget that we’re continuing to roll out. Last year’s Budget is still progressing through the Parliament and a number of initiatives that you’ve identified including the changes to fuel excise have just passed through the Senate, just an hour ago. So there are a number of initiatives that are still passing through the Parliament. But I think the Labor Party has been mugged by reality and that is, that they have to help us to clean up the mess that they created and our program is well underway. 

PETER VAN ONSELEN:

You must want to mock them for it, I mean they gave you such a ribbing over fuel excise being reindexed and it was a policy that almost universally economists said had to happen. Labor walked away from it at the time of course and the Greens, but they’re now on board. It must be hard to resist pointing out that they’ve flip flopped.

TREASURER:

Well, look what matters is the outcome. Clearly the Labor Party has been all over the shop but what matters is the outcome Peter. From our perspective, we want to build a stronger Budget, we want to build a stronger economy. Sometimes it’s going to be difficult to get significant structural reforms through the Senate. But sooner or later, reality has to dawn for the Labor Party, the Greens and the Independents and that is, that you can’t continue to spend money at the level that we inherited from the Labor Party. Now, there’s still much work to be done. There’s still a lot of work to be done. There are still a number of initiatives that need to pass through the Senate, but as you correctly identify, our program is well underway.

KRISTINA KENEALLY:

Treasurer, one of the concessions, I suppose, that your government gave to the Greens, in terms of pension reform, was the broader review into retirement income. Is that as the Labor Party says, a dud deal for the Greens? Or is there any possible that we will see some outcomes from that review?

TREASURER:

Well Kristina, we have a taxation white paper process underway and what we’ve said is that as part of that process and after taking into account the recommendations of David Murray, as well as a Productivity Commission review that is underway, we will carefully consider the recommendations that come out of that, but our plans are clear. We do not want to see any adverse decisions in relation to superannuation. We want to provide stability and certainty for superannuants, particularly given that returns are very low at the moment for superannuants...

PETER VAN ONSELEN:  

Treasurer, you must do something at the higher end. I understand the Prime Minister has ruled it out, almost forever and a day. Most experts believe that some reform which would put a little bit more of a taxation burden on high income earners around the super sphere will have to happen at some point.

TREASURER:

Well a lot of the people that actually have a considerable amount of money in their superannuation have been able to accrue that under the old laws which were set up under Labor. They accrued in some cases very significant amounts in their superannuation accounts. You would not be able to achieve that today, and certainly would not get the benefits of those concessions today. So it has changed and we’re dealing with a lot of legacy accounts that are being held up by the Labor Party as abuses of the system. I would say to the Labor Party that the concessions that are in place today were in the main set up by the Labor Party. They said only two years ago that they weren’t going to change those arrangements. Now they’re proposing new taxes. We reject those new taxes and we want to have a period of stability and certainty for superannuants.

PETER VAN ONSELEN:

I was talking to Penny Wong a little while ago about the Free Trade Agreement with China. She had mild concerns around the edges. But at the end of the day, the speed with which this has been brought about is the Government fully satisfied with what it has achieved in this space?

TREASURER:

Well it’s been 10 years in the making Peter. It hasn’t been a rushed job if you like. But certainly, there’s been a steely determination on our part to grow the opportunities for Australian business and our Free Trade Agreements with Korea, Japan, and China have certainly made a difference. And I can say to you, announce on your program, that we will be joining the Asian Infrastructure Investment Bank and I’ll be travelling to Beijing next Monday to join with 56 other countries in signing the agreement to become a founding member of the AIIB which is a $100 billion development bank for the Asian region…

PETER VAN ONSELEN:

Is Cabinet united on this? Just because there were reports some time ago that Julie Bishop and [inaudible] and there were members of your Cabinet that were being swayed by this even though more recently we have been hearing that this was likely what you’re talking about for next week.

TREASURER:

Well look, there were reasonable concerns raised about whether the AIIB would be truly a genuine international bank and have similar accountability and processes as that of the World Bank or the IMF. We’ve been involved in intense negotiations with the Chinese and other potential founding members. We are absolutely satisfied that the governance arrangements now in place will ensure that there is appropriate transparency and accountability in the Bank. I have spoken with the Secretary of the US Treasury Jack Lew about it in the last 48 hours. And we’ve also spoken with the Japanese Government to address their concerns. At the same time, the proposal went through Cabinet unanimously.

KRISTINA KENEALLY:

Treasurer, what was the reaction of the Americans when you spoke to them?

TREASURER:

Look, they understood exactly where we were coming from. It is a significant opportunity for Australia. Asia has an estimated $8 trillion infrastructure shortfall over the next ten years. The AIIB will work with the Asian Development Bank; will work with the World Bank and a range of other banks, to ensure that we try and get the infrastructure into Asia that helps to address our concerns. Because if there are more ports in Asia, if there are more railways, more electricity grids and more essential infrastructure in Asia, then that means we can get our raw produce to those markets. It’s better for our minerals exports, it’s better for our agricultural exports. And certainly it represents huge opportunities for our services exports…

PETER VAN ONSELEN:

[inaudible] I mean the critics of it say it’s not really big enough, it’s just China trying to expand its power base when we look at the World Bank, and you look the Asian Development Bank, the size of the spend there dwarfs this new infrastructure bank.

TREASURER:

No, it is a very very significant entity. It’s now over $100 billion of available funds. Our commitment to it will be $4.7 billion, of which around $930 million will be paid upfront the rest will be callable capital. That will not affect our underlying cash balance because it’s an investment in the Bank. But I’ll tell you the dividends to Australia out of this will be far greater, far greater, over the years ahead than we could have ever have imagined a few months ago when we first considered joining the AIIB.

KRISTINA KENEALLY:

So Treasurer, when will Australian companies, the Australian economy start to see some of those dividends flow out?

TREASURER:

Well I’ll be travelling to Beijing on Sunday. We’ll be signing up with 56 other countries on Monday. And then there will be negotiations about board positions, we will certainly be expecting to be on the board in the first few years…

PETER VAN ONSELEN:

Do we have any guarantees in that space?

TREASURER:

No, even though we are the sixth biggest shareholder, we’re not big enough to command a board position in our own right, but we are in discussions with New Zealand, Singapore and a number of other countries about setting up a pool of shareholders that ensures that we have a very regular seat at the table.

KRISTINA KENEALLY:

Treasurer, can I take you too some domestic matters now. Yesterday we saw the New South Wales Government bring down the Budget and one of the things that was projected in that Budget was continued strong growth in housing prices and continued strong growth to the government in terms of stamp duty revenue. Are you growing concerned about state governments being increasingly dependent on what is, at the end of the day, a quite inefficient tax?

TREASURER:

Well Kristina, as you know, as a former Premier of New South Wales, there can be a certain element of volatility in those revenues. There has been tax reform involving stamp duty and land tax in the ACT. It is also the case that the South Australian government has announced some reform in their recent budget, just last week. Clearly New South Wales is the beneficiary of a windfall benefit in stamp duty and the significant rise in house prices in Sydney in particular, but they also made structural reforms in New South Wales and to the great credit of Gladys Berejiklian, and as Premier, of course Mike Baird, they’ve undertaken structural reforms that have ensured they’re able to deliver a surplus. We want to follow the lead of the New South Wales Government and get the Budget back to surplus. But there’s still more work to be done.

KRISTINA KENEALLY:

I’m not going to take anything away from the work of Berejiklian and Baird here, but they do have a surplus really based on the strong housing prices and the unexpected growth in stamp duty. You’ve got a green paper out, they’re talking about changing the way the GST is deployed if you will, and talking particularly about allowing states to collect GST on the basis of population, now you’ve got to think the states, the bigger states like New South Wales would truly welcome that. One might even go a step further in allowing the states to be the collector of the GST and then the Commonwealth could provide top up grants to those states who need a bit of extra help.

TREASURER:

Well, I look forward to your submission to the federation discussion paper.

KRISTINA KENEALLY:

[laughter] on behalf of Sky News.

TREASURER:

That’s right. Sky News has a never ending submission to these sorts of policy debates. The review of the Federation is hugely important. Everyone talks about the complexity of government in Australia. Tony Abbott has worked very hard on this issue, together with the good will of premiers and chief ministers, whether they be Labor of Liberal. This is hugely important. The last serious attempt at having a really genuine review of the Federation was of course back in 1991 when Bob Hawke and Nick Greiner worked together and various premiers were involved, in trying to reshape the Federation to make it more efficient. The last hoorah, if you like, was October I seem to recall in 1991, it’s been too long.

PETER VAN ONSELEN:

[inaudible] lamenting a question from Bill Shorten in the past couple of days - about health and education, equally lamenting the Prime Minister and ruling out changes that were in that green paper discussion around education, not quite doing so in health, are you really up for the fight though, are you really up for the fight to take genuine federation reform to the people, particularly if the Labor Party are going to demonise individual parts of it?

TREASURER:

Well, you know it inevitably comes down to the good will of the premiers and chief ministers in their negotiations with the Prime Minister. The fact is you’ll never get federation reform unless all the states and territories agree and the Commonwealth agrees. And secondly, by its very nature it needs to be a bipartisan agreement. I think Australians will cheer on anything that reduces the complexity of government in Australia. I think Australians will welcome anything that makes us a more efficient and productive nation and certainly reform of the Federation has the capacity to do that. Secondly, taxation reform will be closely linked to whatever comes out of the discussions between the Prime Minister and the premiers and chief ministers in July. I am in deep discussions with state treasurers on potential areas of reform in taxation. But ultimately I think we all want to see a closer link between the money that is spent by individual governments and the money that is raised by individual governments and that will be one of the key drivers for the reform of the Federation when it’s discussed in detail in July.

PETER VAN ONSELEN:

Well I for one hope it happens, thanks for joining Kristina Keneally and I on the program we appreciate your company Treasurer.