20 January 2016
Transcript - #2016005, 2016

Interview with Jon Faine, ABC 774

SUBJECTS: Tax reform; superannuation; Liberal Party preselections

FAINE:

Kelly O'Dwyer is assistant to the Treasurer, Scott Morrison, she's also Minister for Small Business in the Turnbull Federal Liberal Government. Ms O'Dwyer, good morning to you.

MINISTER O'DWYER:

Good morning Jon.

FAINE:

Happy New Year.

MINISTER O'DWYER:

Happy New Year to you and your listeners.

FAINE:

When are you and your colleagues going to put the, all the options on the table, the cards on the table over tax reform? When John Howard and Peter Costello – and you worked for Peter Costello – when you prosecuted the case for the GST it took years of debate and information. At the moment there's almost no detailed information about reforming the tax system.

MINISTER O'DWYER:

Well that's not quite right Jon. First you're right to say that it did take a long time to actually get some degree of consensus around the tax changes that needed to be made under the previous Howard Government, Howard and Costello Government. In fact it was probably about 20 years in the making. Those discussions had taken place year in, year out and it was after a strong effort on behalf of the Government which wanted to get rid of a whole host of inefficient taxes that they were able to make the real case for tax reform, cutting personal income tax rates, a number of those inefficient taxes, and reforming our taxation system to make it more competitive.

FAINE:

So how realistic is it that you are going to get this conversation going in time for this year's budget or even this year's election?

MINISTER O'DWYER:

Well we have put some information out there, we have started a discussion looking at…

FAINE:

Big picture stuff, nothing of any detail or substance.

MINISTER O'DWYER:

Well that's not right Jon. We have actually been talking with the Australian people about some of the key challenges that face our economy. The key thing to note here is when we talk about tax reform Jon, we're not simply talking in code about increasing taxes – I want to be very clear with your listeners on that – we're talking about reducing the overall tax burden. Now, the Labor Party are talking about increasing a whole host of taxes but we want to reduce the overall tax burden. We want to make our economy…

FAINE:

Not for everybody, you can't do that it's not a magic pudding Kelly O'Dwyer…

MINISTER O'DWYER:

Well what we want to do…

FAINE:

You can't just keep rearranging things without some people being better off and some people being worse off.

MINISTER O'DWYER:

Well, if I can finish, I mean what we want to do is have a more competitive economy. We want to make sure that the tax changes that we bring in are going to mean that we have a more dynamic economy, an economy that can help us to grow and in so doing, create more jobs. Now we've seen a very significant growth in jobs over the last 12 months – more than 300,000 new jobs created…

FAINE:

Not many of them full-time.

MINISTER O'DWYER:

We've seen the unemployment rate go down to 5.8 per cent which is good but there is obviously more work to be done there. So the overall discussion we're having around tax is how we can make a more competitive economy. We've released a tax discussion paper. The Government won't be making any changes until it takes those changes to the next election. It obviously has to be endorsed by the Australian people and they have to know that it's going to be good for our nation, that it's going to be in the national interest.

FAINE:

But you can't have tax reform by ambush. You have to have this long process of explaining it, selling it, discussing it, hearing different peoples' inputs. There's been none of that so far…

MINISTER O'DWYER:

Well we don't disagree on that Jon…

FAINE:

And time's running out. Time's running out either for this budget or for this year's election.

MINISTER O'DWYER:

Well we're going to take any tax reform package to the election and the election's not until later in the year Jon.

FAINE:

Who knows.

MINISTER O'DWYER:

Well I would imagine it's probably later in the year; obviously it's a matter for the Prime Minister. We are going to be very clear with the Australian people where we stand on tax reform. There are a number of people who need to be very clear on their positions as well. The states have got a whole host of taxes that are very inefficient. The Treasurer has been meeting with the state treasurers to talk about what state taxes can go – to again, help our economy to become more competitive. We know that personal income tax rates are actually having a big impact on our competitiveness and those people who are average income earners are going to, by next year, be in the second highest tax bracket. Now we want to do something about that.

FAINE:

OK, so you've got a Budget coming up in May, the election, who knows when it's going to be. So are you saying therefore that there's going to be no serious reform in time for this year's Budget and yet the Budget is in a situation where, with the global economy worsening, with tax receipts lowering because of the end of the resources boom, you've got a pressing problem. You are effectively telling us today then, that you are not going to address that by the Budget, you're going to address it later in the year for the election.

MINISTER O'DWYER:

Well, revenue and tax is one part of the equation, cutting spending is another part of the equation. We know…

FAINE:

You're going to have a savage austerity budget just before an election?

MINISTER O'DWYER:

No, what I'm saying is that we have to make sure that we control our spending. We saw an exponential increase in spending under the previous government, and a lot of announced but unfunded commitments. The Government is very keen to make sure that we embark upon the budget repair job – which we have started – but there is more to go. We need to make sure that our spending as a percentage of GDP gets under 25 per cent which is what we need to do to start delivering surpluses again. So we are looking at both sides of the equation Jon, but when we consider tax reform, we're talking about making our economy more competitive, not simply as the Labor Party would suggest, hiking up more taxes.

FAINE:

You're the Minister for Small Business, amongst other responsibilities. If Bunnings become a virtual monopoly in such a big area of homewares and hardware and renovations and nurseries and all the rest of it, if Woolworths can't compete with them, who can? They become a virtual monopoly. That's no good for the economy, is it?

MINISTER O'DWYER:

Well, small business is absolutely critical to our economy.

FAINE:

And there's a whole market where they have been squashed.

MINISTER O'DWYER:

Well, 97 per cent of all business in Australia is in fact, small business. And the contribution, they make Jon, to our economy is around about $340 billion. They also bear a significant burden in terms of the number of people that they employ in our economy…

FAINE:

But the big box stores are taking over…

MINISTER O'DWYER:

around about 4.7 million Australians. And we want to do our bit to create the right settings for them to be able to have the confidence to invest in their businesses and to employ more people. Now what we've done, what we've announced is a 1.5 per cent company tax cut for small businesses. For those that are unincorporated entities it's a 5 per cent discount. We've allowed small businesses to invest in particular assets in their small business, that will help their small business to grow. So, eligible assets $20,000 and under that they invest in, they get an instant asset write off. That applies right up until the 30th of June 2017.

FAINE:

With respect, that is not going to be any use whatsoever with a suburban hardware shop trying to compete with something as gigantic as a Bunnings. Even Masters and Woolworths with their deep pockets and American investment, if they couldn't take on the giant, nobody can.

MINISTER O'DWYER:

Well competition has always been a part of our economy Jon, and it's not the job of the Government to favour one competitor over another…

FAINE:

But this becomes a monopoly doesn't it – it is not competition.

MINISTER O'DWYER:

We've got competition laws in place at the moment. The ACCC has got very significant powers to take action in relation to anti-competitive conduct and they have done that in the past and significant penalties have been applied. So if there is cartel conduct, if there is collusion, if there is anti-competitive conduct, we've got laws at the moment that do deal with that and our ACCC Chairman, Rod Sims, I know, is very active in this space.

FAINE:

Moving on to superannuation. In the Financial Review today, the Self-Managed Super Fund Owners Alliance called for superannuation tax reform. They say that super earnings should be totally tax free. Are you in any way tempted?

MINISTER O'DWYER:

As I've said, there are a lot of people contributing to this discussion and to this debate.

FAINE:

They say it will have zero impact on the public purse.

MINISTER O'DWYER:

We are listening obviously to all of the views that are being put by various people and we are evaluating that. The Government believes that the retirement incomes of Australians is critically important and we want to encourage people to save for their retirement futures, and we do that very significantly through tax concessions that we apply to superannuation. There is a very long lead time though in relation to superannuation, which is why you have to be very careful when you make any potential changes to super. Now we know that the previous Labor Government ripped about $8 billion out of superannuation in their six years in office. That has an impact on people when they think about how they save their money and how they prepare their retirement incomes. We are being very cautious and sensible in the way that we approach this. We have already announced some changes that we want to make to the superannuation system. We want there to be better governance in superannuation. It is a $2 trillion industry, we know that needs to be more independent members on boards to make sure Australian can maximise their retirement income in retirement.

FAINE:

Final issue Kelly O'Dwyer, Assistant Treasurer, who's with me in the studio this morning. Front page of today's Australian newspaper: 'Turnbull Warned of Pre-selections' Civil War'. Day after day, stories of pre-selection brawls within the NSW in particular branch of the Liberal Party. The old adage: if you can't govern your party, you can't govern the country.

MINISTER O'DWYER:

There have always been preselection battles Jon, but it's not the core focus of the Government. The core focus of the Government is to govern in the national interest for all Australians and that is exactly what we're focused on.

FAINE:

If you and your colleagues can't sort this out internally, it reflects on your capacity to run the country and the trust that the Australian people are being asked to have in you surely.

MINISTER O'DWYER:

I think this is a very insider issue and I have to say to you, the Prime Minister has made his position very clear. He supports current sitting members.

FAINE:

Even Bronwyn Bishop?

MINISTER O'DWYER:

He's made his position clear on this.

FAINE:

Even Tony Abbott?

MINISTER O'DWYER:

Current sitting members – he has said that they have his support as his colleagues.

FAINE:

Do you think Bronwyn should go round again?

MINISTER O'DWYER:

I am in no position – I don't have a vote in this preselection Jon…

FAINE:

No, but I'm sure you have an opinion.

MINISTER O'DWYER:

Frankly, that is for the preselectors to decide and then ultimately for the Australian people to decide in those various Federal Electorates. It's for them to evaluate those decisions. I know that a number of my colleagues have served over many years with great distinction. It's not a job for life. It's quite appropriate that as we are a Party that believes in competition there will always be competition for these various, very privileged, positions to represent your local community – and there's nothing wrong with that.

FAINE:

Thank you in indeed for your answers to my impertinent questions this morning and happy New Year.

MINISTER O'DWYER:

Great pleasure Jon.