6 August 2015
Transcript - #2015163, 2015

Interview with David Speers, Sky News

DAVID SPEERS:

Joe Hockey thanks for your time. The jobs data out today does show a quite solid increase in overall employment - 38,500 new jobs. But unemployment’s gone up as well; it’s now at its highest rate in some 13 years. Are you disappointed with these figures?

TREASURER:

Well, the headline rate is just bouncing around too much at the moment. That’s one of the reasons why we’ve given the Australian Bureau of Statistics an extra quarter of a billion dollars to upgrade their computer systems which are…

DAVID SPEERS:

So you have doubts about the figures?

TREASURER:

It does bounce around, but look the important figure is – there’s two important figures out of today. The first is that 38,000 jobs were created last month. That’s in line with all the private sector analysis as well. The second is that we’re seeing an increase in the workforce participation rate which is very, very important. So if the workforce participation rate had stayed at the same level as last month, the headline unemployment rate would be about 5.9 per cent, so it would have been a fall. It just shows that these numbers bounce around, but what we’ve got is real momentum in the Australian economy.

DAVID SPEERS:

But if you’re going to trust the jobs growth and the participation rate growth, you’ve also got to accept the unemployment figure is…

TREASURER:

Sure, look of course I do. But as you know, as everyone knows, the figures are bouncing around so you’ve got to look at other indicators as well and the fact that earlier this week we had record increases in retail trade, I mean really impressive retail trade numbers for the June quarter. That’s on the back of a series of other indicators that show the Australian economy is getting some good momentum.

DAVID SPEERS:

But what do they tell you about the Budget initiatives in particular. The small business package, the centrepiece of the Budget. Yes retail trade might be up, but unemployment’s up as well, is it actually generating jobs?

TREASURER:

Well 38,000 jobs last month. 38,000, I mean it’s hard to argue against that. We promised at the last election a million new jobs in five years, we’re on track. That’s despite having fairly significant offshore headwinds. So the transition in the Australian economy is well underway. We are dealing well with the move from a mining construction phase into mining production and a broadening of the output of the Australian economy. I think we’ve got good momentum in the Australian economy and I believe at the moment, overall forecasts are a little on the pessimistic side. I’m more optimistic about where we’re heading over the next two to three years.

DAVID SPEERS:

But is unemployment too high? The highest rate since…

TREASURER:

Well, it’s always too high whatever it is. You don’t want to see people unemployed. The fact is that you’ve got to create jobs, so that’s one of the reasons why we’ve got a record level of new investment in infrastructure. That’s why we can never give up on economic reform. Because it’s that economic reform that is going to facilitate the jobs of tomorrow.

DAVID SPEERS:

Well let me ask you about that, because there clearly are a lot of people out of work. It’s now over 800,000 - 800,700 people unemployed. That’s up since you came to office…

TREASURER:

Well the population has grown, to be fair…

DAVID SPEERS:

What sort of reform is needed? We’ve seen this week the Productivity Commission suggest some IR reform. You’re a former IR Minister; you’ve looked at this for a long time. What about the idea of getting rid of Sunday penalty rates for retail and hospitality?

TREASURER:

Well it’s hugely important when we talk about reform to understand what it really means. It’s basically about changing the rules to accommodate a new economy. To accommodate the change that is being driven by consumers. What’s happening is consumers are shopping online 24 hours a day, 7 days a week. So, if we make it harder for consumers to walk down to the shop to buy the sorts of goods that they want to buy, or we make it more expensive for them to go and speak to a shop assistant, they’ll simply buy goods online. That’s one of the things that has obviously driven the thinking of the Productivity Commission. The people that made the report, drafted the report for the Productivity Commission, were all appointed by Labor. Yet Mr Shorten came out and attacked the report before he’d even read it…

DAVID SPEERS:

So you do see some sense in this though? Getting rid of the Sunday rates?

TREASURER:

I think you’ve got to accommodate changing behaviour from consumers. Now in relation to retail, obviously retail trading hours have to change, and that’s up to the states. It’s plainly ridiculous for example, that you’ve still got restrictions on retail trading hours in some states when people can sit at home in the lounge room and buy goods immediately over the internet and it can be shipped in from around the rest of the world in a couple of days. So that’s clearly got to change. In the case of hospitality, a computer at home is not going to deliver you a coffee or breakfast. It’s not going to deliver you the clean room when you’re staying at a hotel. So there are needs in relation to hospitality, but the hospitality industry is plainly – it has been disadvantaged unquestionably by the award modernisation program, which means the same rate applies in every part of Australia. And we’ve seen jobs go, there’s no doubt about that, because you can see it around you when coffee shops, when hotels are closed on Sundays or public holidays or during peak season over Easter. You ask the question why? And they say they simply can’t afford the labour.

DAVID SPEERS:

You’re making some strong arguments here but just to be clear, Sunday penalty rates, you think they should go?

TREASURER:

Well again that comes down to negotiations before the Fair Work Commission, as the Prime Minister said…

DAVID SPEERS:

Or you could legislate.

TREASURER:

I don’t think it needs to get to the point of legislation at the moment…

DAVID SPEERS:

The Fair Work Commission takes a long time to do these things.

TREASURER:

We would encourage business to be more proactive in their engagement with the Fair Work Commission. Also, there is the capacity for regions of Australia to appear before the Fair Work Commission to lodge a claim. Now that hasn’t really been taken up, but I would argue that tourist regions in Australia for example, be they along the Great Barrier Reef or be they in certain parts of the country, should be able to appear before the Fair Work Commission.

DAVID SPEERS:

Does that mean you won’t legislate?

TREASURER:

We haven’t received a final report. The Productivity Commission provided a report to government. It was not a government report. We will be interested in the feedback from the community and also, we want to hear the voice of the workers, we want to hear the voice of employers, because there has to be a trade-off that is fair to workers as well.

DAVID SPEERS:

Now we’re at the roughly two year mark since the election. That means a year or less left on this term. I just want to get a sense of where we’re at in terms of your stewardship of the economy. You spoke a lot a couple of years ago about a spending problem rather than a revenue problem. Is that still how you see it? That we’ve got a spending problem rather than a revenue problem?

TREASURER:

Yes it is still the case, there’s no doubt about that. Now, we made very good progress the last two weeks of Parliament in June, there’s no doubt about that. With some welfare changes, with other changes that had been held up in the Senate. I think the Senate is proving to be far more pragmatic now than it has been in the past and that’s a welcome change. We are still as a nation spending too much through our government. Every dollar we spend as a government comes out of some taxpayer’s pocket. So ultimately, we will never be able to tax our way to prosperity. But if we can get back to the point where we live within our means, then we’ve got more options. More options to spend money in areas that individuals and families and businesses choose to spend in order to grow the economy and create jobs.

DAVID SPEERS:

But we have seen the Prime Minister this week announcing spending measures. Frigates, patrol boats, new roads, a manufacturing hub in Geelong today. It just seems to focus on – I’m not saying Labor is any better on this. The focus from the government at the moment is on spending more.

TREASURER:

Well, at the moment we have to spend on infrastructure because of the lag and the failures of the previous government. What happened on defence David was unbelievable. I think there were many public decisions of the previous government that caused a lot of grief, but when it came to national security, to make no decisions for six years about naval vessels was unquestionably the worst and most negligent decision of the previous government. Now, we’ve had to step in and do something about it. It does come at a great cost, but national security is one of those areas where the Coalition believes whatever has to be spent, must be spent. Now what we are endeavouring to do, is deliver a shipbuilding program that ensures that we have a capability for the next 50 years. Importantly, we can secure a supply of ships on a timetable that we control and influence.

DAVID SPEERS:

Alright, but just on the spending issue itself. Spending is running higher this year as a percentage of GDP than when you came in. So, are we going to see that figure come down?

TREASURER:

It has to come down. It is unsustainable to continue with government expenditure at the levels it is at. Now a lot of that is recurrent expenditure, it’s locked in through welfare programs, health programs, education programs and so on. There are only two options. One is you have increasing co-payments from individuals that use services. Or the second is that you massively increase taxes. Now, if you massively increase taxes the burden falls on fewer and fewer people and in the 21st century those people and those companies have more capacity to move offshore and thereby totally reduce their tax burden then they might have had in previous years.

DAVID SPEERS:

Alright, let’s talk about the tax side of the equation. A few weeks ago you said it was game over as far as the GST was concerned, is that still your view?

TREASURER:

Well I am hopeful that through discussions between the Prime Minister and the Premiers, that there is a more common sense approach in relation to tax reform. When the beneficiary of a tax change is a strong advocate against that change, it’s very hard for us to proceed with that change. Now the Prime Minister and a number of Premiers have contacted me and assured me that there were very productive discussions about tax reform more generally between the leaders. But I want to emphasise, simply increasing taxes is not tax reform. You actually have to have a fairer, simpler and lower tax system. The Prime Minister is adamant about that, I am adamant about that. The Federal Government is not going to go down the path of simply increasing taxes to give more money to the states to spend more.

DAVID SPEERS:

But this seems to be the key difference. Mike Baird’s talking about a 15 per cent GST to pay for health services; you’re not up for that?

TREASURER:

I’m not up for an increase in federal taxes to increase expenditure by the states.

DAVID SPEERS:

We’ve got to pay for health somehow though?

TREASURER:

Well we do. Part of that is we pay along the way, but bear this in mind; the federal government spends more on healthcare than the state governments combined…

DAVID SPEERS:

So bracket creep…

TREASURER:

So, bracket creep again, without going through every single tax, but I have long argued that bracket creep, where people fall into higher tax thresholds, is actually going to detract from economic growth. You can see the lumpiness of people’s income just before they reach a new tax threshold. So what they’re doing is they’re minimising their income so that they don’t have to go into that new tax threshold. That is simply unsustainable…

DAVID SPEERS:

So where does the money come from?

TREASURER:

Well, this is it. You’ve got to have savings and when you have tax changes you need to look at a range of different options. We are currently, carefully considering a…

DAVID SPEERS:

But you’re ruling out a lot things aren’t you, negative gearing…

TREASURER:

No I wouldn’t say that at all.

DAVID SPEERS:

Superannuation, negative gearing, capital gains tax, GST.

TREASURER:

Well to go through them, in relation to superannuation we have said that it is insane to impose new taxes on superannuation at a time when you have record low returns. Obviously there are a lot of people that rely on their superannuation income. If you were to impose a new tax on them it simply means they have less money in their pockets. What we’re trying to do is excite the animal spirits, not just with business but of consumers as well. The way to kill that innovation, that risk taking, that investment, that consumption, is to impose new consumer taxes. One of them would be a tax on superannuation which Labor wants. In relation to negative gearing, it’s middle income Australians that are the biggest users of negative gearing. This is lost in part of the debate. It’s also the case that with negative gearing, for a number of people, the only way to get into a relatively heated housing market like Sydney or Melbourne is to negatively gear first and then become a home owner. So these things need to be carefully considered. Labor’s looking at every tax increase they can get away with. We’re saying hang on; if you have tax reform it needs to end up with lower, simpler and fairer taxes.

DAVID SPEERS:

Just on the GST, you’re meeting the State Treasurers soon, looking at how the GST applies to online imports. You want to bring down the threshold. Do you want to bring it down all the way to zero?

TREASURER:

Well we are aiming to get it down to zero so that there is the very same GST system applying to goods purchased overseas as would be purchased in Australia. I think that’s a pretty reasonable threshold test. Obviously, to get companies supplying goods to Australia to charge the GST in the same way they might charge consumption taxes in Europe or Japan or so on is going to be difficult. We will discuss the process with the State Treasurers next Friday, but I am confident that we can ensure that businesses operating in Australia are competing on a level playing field with people providing goods from overseas.

DAVID SPEERS:

Last question, it’s on the MPs entitlements saga that’s dragged on for some three weeks now. You were clearly nonplussed when this story broke about Bronwyn Bishop; you said it didn’t pass the sniff test, the helicopter ride. Since then we’ve seen all sorts of MPs on both sides dragged into this. You’re in the paper today for some charter flights in Tasmania. Do you concede that this whole affair has left a bad smell about the whole political class?

TREASURER:

It’s obviously hurt everyone, it’s hurt everyone. But we’ve got to be careful with taxpayers’ money and where we can be prudent we should be prudent. There’s now an independent review. MPs and Ministers are, they’ve got jobs to do, and they need to be able to do their jobs. At the same time we’ve got to respect taxpayers’ money.

DAVID SPEERS:

Joe Hockey, thank you.

TREASURER:

Thank you very much David.