9 February 2016
Transcript - #2016017, 2016

In the role of: Minister for Small Business and Assistant Treasurer [21 September 2015 - 18 July 2016]

Interview with Michelle Grattan, the Conversation

SUBJECTS: Tax reform; superannuation; the Small Business and Family Enterprise Ombudsman; women in Parliament.

MICHELLE GRATTAN:

Today we are talking with Kelly O’Dwyer. When Malcolm Turnbull came in he promoted her from a Parliamentary Secretary to Assistant Treasurer and Minister for Small Business. She went into Cabinet doing the jobs previously done by two Ministers. So it’s not just been a busy few months for O’Dwyer but a lot of learning too. O’Dwyer however has a background steeped in the issues. She worked for then Treasurer Peter Costello and also in the investment banking sector. Kelly O’Dwyer we now know that the tax plan will be in the budget with some announcement or announcements expected beforehand. Can you give any indication when these might come?

MINISTER O’DWYER:

Well look we are still working through all of the options that have been discussed. We think it is incredibly important that when you have a discussion around tax that you properly look at the various options on the table and the outcomes that will be delivered by the various options. Most importantly though, you need to be very clear on what it is you are trying to achieve with broader tax reform. We’ve stated up front that we understand that tax is one of the great levers that the Government has at its disposal in order to create the right economic settings and reduce disincentives for people to work hard and be rewarded for their effort. We are very concerned that the average wage earner is going to be heading into the second highest tax bracket as of next year. When you consider only fifteen years ago you had eighty percent of taxpayers paying less than thirty cents in the dollar. This is very significant. From my own portfolio perspective of small business, I know that this hits small business hard as well because they are paying those taxes. Because 70 per cent of all of those small businesses are in fact not incorporated so any changes in this regard hits small business. Now we want to make sure we get the right economic settings in place to help drive our economy forward; which is why we have been having a long discussion about this; why we have been looking at the evidence; why we have been very careful to consider what the outcomes will be of various different permutations and combinations that have been put on the table.

GRATTAN:

Now the Treasurer, Scott Morrison, and you have been emphasising the challenge and the problem posed by bracket creep. But now that we have had the Prime Minister put the GST if not completely off the table, hanging from the table, not likely to be in the mix – GST rise that is – how can we get serious about bracket creep?

MINISTER O’DWYER:

Well I think what the Prime Minister very clearly said is that if you are going to embark upon a very big tax mix switch, if you are going to look at significant income tax cuts and if you are going to look at the potential changes to a GST you actually have to be convinced it is going to achieve the things that you want and expect it to. That, number one, it is going to deliver growth in our economy. Now you know I have said this many times and it’s very true our prosperity as a nation is not predestined. We need to continue to grow our economy in order to lock in high living standards. We’ve had 25 years of uninterrupted economic growth and we want to make sure that that continues and there are challenges ahead for us. So the Prime Minister I think has made a pretty obvious point that if you are going to embark on such a significant change it has got to deliver the outcomes that you need and expect it to and until he is convinced on the basis of the evidence before him we will not go down that particular path. So the Labor Party has engaged in what I would consider to be very lazy economics. They don’t even want to look at the options on the table. They are prepared to rule things out before they have even considered the evidence. I don’t think that’s a very sensible way.

GRATTAN:

But hasn’t the Prime Minister effectively ruled it out? He said he’s not convinced it would deliver the growth dividend and that it would have all sorts of costs like compensation, and complications. It will not be possible now for him to breathe new life into that option, would it?

MINISTER O’DWYER:

Well look, we haven’t yet announced our final tax package and the Prime Minister has also been clear that when we are in a position to announce that before the election we will do that. But he’s been very upfront and honest with the Australian people about the fact that if you are going to make significant changes it’s not as Labor would say; you just simply hike up taxes to chase ever increased spending! You actually need to be very measured and prudent in the way you go about it. And he recognises that the Australian people are very intelligent and he can, in fact, have a conversation with them about this. And he’s said, look, until I’m convinced, we’re not going to be making knee-jerk changes because they can have serious implications.

GRATTAN:

So you’re saying that this question of being convinced is still an open one, it’s not closed. It’s possible that Prime Minister and other colleagues could become convinced with the work that’s still underway.

MINISTER O’DWYER:

There is still work underway, that’s correct Michelle, and that’s the point that the Prime Minister made. That’s the point that the Treasurer’s been making. You’ve got to consider all of the options. That’s why we’ve embarked upon this process in the way that we have. And that’s why I think the Australian people are confident that we will be able to present a plan to them which is focused on the national interest, not anybody’s political interest, but the national interest, and in making sure that Australia is headed in the right economic direction. Not only for today, but for tomorrow as well.

GRATTAN:

What sort of mix do you believe will drive economic growth the best?

MINISTER O’DWYER:

Well, this is a matter that we are actually discussing at the moment Michelle, and I’m not going to flag here today some of those internal discussions that we’re having at the moment. But, as has been mentioned by the Prime Minister and the Treasurer, we’re looking at a number of different options on the table. Let me perhaps outline it in terms of principles because I think that may give you an understanding as to the way that we measure up different tax reform options. Number one, we want to make sure that any option that we put on the table for the Australian people to consider will contribute to growth of our economy. In contributing to growth we are going to be contributing to jobs. Number two, we want to make sure that any changes we make are not going to add to the overall taxation burden. We need to make sure that we are not simply adding to the tax burden which is already very high for Australians. Number three, we want to make sure that it is going to be fair to people, and that’s why we’ve talked about always considering whether or not concessions are properly targeted. And finally, it has got to be as simple as it can be because through that simplicity, people can readily understand the tax systems and abide by it, and it has proper structure and integrity.

GRATTAN:

Just getting back to the question of economic growth. We do know that substantial company tax cut would be quite a stimulant to the economy but is that just politically too hard?

MINISTER O’DWYER:

Certainly there have been a number of people who have expressed their view very strongly that company tax cuts would have a very significant impact on growth. You’d be aware that before the last budget and on the day of the Budget we announced a very significant package for small business in cutting the company tax rate by 1.5 per cent and for those small businesses who are unincorporated, providing them with a five per cent discount. We know that that has had a very positive impact on small business, particularly. And we know that that’s important because 97 per cent of all business is in fact small business. Small business employs about 4.5 million Australians and where we can encourage them to invest more in their business, to be confident in their prospects going forward, in the growth that they are going to achieve, and in the economy, we know that they are more likely to put on more people and that means more jobs.

GRATTAN:

Is this round of tax reform going to be the last for a decade, perhaps?

MINISTER O’DWYER:

I think we haven’t actually announced our final plan around tax…

GRATTAN:

When it comes, whatever it is.

MINISTER O’DWYER:

So I think any prudent government constantly looks at the settings and reassesses whether they are right for those times. I also think that when it comes to more long dated policy you have to give a period of time for things to settle. One of the great complaints of course was that the previous Labor Government kept mucking around with superannuation. We have heard a number of suggestions from the Labor Party about how they would like to do a little bit more to that. We need to always be very, very cautious that when we make changes, particularly for long dated policy like superannuation that it is very considered and there is a period of time for a transition and adjustment for people who may be affected and that you give it a period of time to settle as well.

GRATTAN:

Now just before we come to superannuation in a bit more detail, how much notice will you be paying to the Business Council of Australia’s modelling which is coming up quite soon?

MINISTER O’DWYER:

We have been looking very carefully at all of the information that has been provided from a whole range of very informed and very interested contributors. The BCA of course represent a significant membership in the Australian community but they don’t represent everyone. We will look at what they have to say and we will evaluate it but we will run it through our own process as well to make sure that we are confident of what is being put before us. We don’t simply look at the information and don’t run the ruler over it, we always run the ruler over it and that is why it takes a bit of time.

GRATTAN:

And they of course wanted very radical tax reform.

MINISTER O’DWYER:

They are very keen to see a significant cut in the company tax rate. They have put that position strongly. There are others who would like to see very different changes to our tax mix. There are a number of different voices on this which is why you need to take the time to actually work through all of the various proposals.

GRATTAN:

I noticed that the President of the Liberal Party in your home State of Victoria, Michael Kroger, was very harsh on the CEO of the BCA, Jennifer Westacott, this week he indeed said she should be flatly sacked. What do you think about this judgement?

MINISTER O’DWYER:

I have had very good dealings with Jennifer Westacott, I think she is a very sound representative of the Business Council and I am very confident that the Business Council doesn’t need any advice from anyone on who they should appoint to represent their interests.

GRATTAN:

Now just coming to taking up your point about superannuation, you are responsible for superannuation in your Ministerial duties and you have obviously already been active in this area. But just on the point of changing the concessions – the signs are that this is something that is going to be in the tax package but how difficult is it in light of what you were saying about uncertainty and so on to make changes? Do you think that this really unsettles people who are either retired or getting close to retirement?

MINISTER O’DWYER:

I think people are always very concerned when they hear the Government talking about superannuation reform because they often think that that is code for the Government simply trying to rip more out of the superannuation system. When we talk about superannuation reform, we are talking about it from the perspective of ensuring that people who are looking to retire can have good retirement incomes, which means they don’t have to rely on the Age Pension in full or in part. That is our objective for the superannuation system. That was the starting point that David Murray outlined in the Financial System Inquiry and I think that when you consider superannuation policy no matter what it is, you need to be very clear on what the overall objective is as the starting point and measure against that. Now, the Government has made a number of announcements to do with superannuation to actually fulfil that objective, the first is to make sure that we have the strongest possible governance standards for our superannuation funds. This is no longer a cottage industry, it used to be a couple of hundred million dollars under management today we are talking about an industry that is around $2 trillion and within 20 years we are talking about an industry that will be upwards of around $9 trillion. These are very, very significant sums of money and they are really critical to everyday Australians who are going to need to rely on that income in retirement. We need to make sure that we have the best standards of oversight for those funds in the world. Not the worst, but the best. The Government has got legislation in the Senate that will deal with that. Now the Labor party for their own reasons has opposed these very sound governance changes despite the fact that advisers right across the industry, whether an industry fund or retail fund, or corporate fund, but they are listening to political interest and vested interest rather than national interest on this and I appeal to them to look more closely at that and think about the Australians who will want to be assured that they have got the best governance for superannuation funds.

GRATTAN:

Now this is to have a third of the director’s independent on…

MINISTER O’DWYER:

And an independent Chair.

GRATTAN:

And a chair as well, yes. The industry funds feel this is getting at them and yet those funds are producing some best outcomes and returns to their members, so why is that change necessary?

MINISTER O’DWYER:

So – there have been two separate reports that have been very clear on this that we aren’t meeting world’s best practice on this. Jeremy Cooper, under the previous Labor Government, conducted a review on this and he said the industry has changed and you need to ensure you drag up the governance standards because the industry has changed.  You no longer have single member funds, you have got a number of funds where people are part of those funds who might have nothing to do with the employer or the union of the fund that they are involved in and their interests need to be represented in that fund, which means you need to get independence on those boards, he recommended the independent directors.  David Murray went further in the Financial System Inquiry he actually said it should be a majority of independent directors and you should have an independent chair. The Government took the position that we would accept a minimum standard of one third and an independent chair and that it shouldn’t just target any one particular section of the industry, it shouldn’t just be industry funds, it should apply across the board to retail funds, to corporate funds, to industry funds, this is not ideological this is simply about delivering the best standard of governance, which frankly I think is a bit of a no brainer.

GRATTAN:

Now you’ve mentioned Labor but can you persuade the crossbenchers to support this?

MINISTER O’DWYER:

We’ve been in really good discussions with the crossbench on this and we’re hoping this year we will be able to bring that back and to have this Bill voted upon. We didn’t vote on it at the end of last year but we’re working towards actually getting a vote on that this year - along with other changes to superannuation like allowing people to be able to choose their own funds.

GRATTAN:

So where are you up to on that measure?

MINISTER O’DWYER:

On that particular measure we’re bringing forward legislation in the next couple of weeks. At the moment people who are a part of an enterprise bargaining agreement or workplace agreement are forced to be part of a particular fund that is determined for them – they have no choice. Now when it comes to enterprise bargaining agreements there are over 20,000 of them in Australia, 26 per cent of them have absolutely no choice whatsoever. We as a Government say we want people to be able to make choices about their future and their retirement income. We want them to be active in their superannuation in making active decisions and for those people who want to choose their fund, they shouldn’t be stopped from doing it because they could find themselves in a situation, if we continue on with the rules as they are, that they might have multiple funds because they might have multiple jobs where they’re paying multiple sets of insurance premiums, multiple sets of fees, all of which means they will have less in their retirement income.

GRATTAN:

In your Small Business ministry role you’ve recently appointed Kate Carnell who was the head of ACCI, the Australian Chamber of Commerce and industry, to be Small Business Ombudsman and she replaces the Small Business Commissioner with the passage of legislation renaming the job.

MINISTER O’DWYER:

I think sacked is very strong Michelle, I would in fact say that the initial Ombudsman role, he served with great distinction and the Government is very grateful for his service. The Government made an announcement before the last election that we wanted to have a Small Business and Family Enterprise Ombudsman that would have more significant powers not only to advocate on behalf of those small businesses and family enterprises but someone who would also be able to be involved where there are disputes and resolving those disputes before it comes to really costly litigation for those small businesses. We also know that one of the greatest bugbears for small business is red tape and unnecessary regulation and the Small Business and Family Enterprise Ombudsman will have a very key role in making sure we can clean this stuff away that is actually holding business back.

GRATTAN:

But do you accept any criticism of the process of the appointment?

MINISTER O’DWYER:

I think the process – well it was a merit based process. This was entirely separate to Government, the process. Recommendations were made to Government and we accepted the recommendation that was made.

GRATTAN:

Now turning to something completely different. Your promotion was part of getting more women into Cabinet, do you think there still needs to be an increase in the number of females in Cabinet?

MINISTER O’DWYER:

I think we’ve made a significant improvement from one woman into Cabinet to five women in Cabinet. And all of those women have been given very key roles. For the very first time in my role you’ve got a woman who is in Cabinet for the first time holding a treasury portfolio. You’ve got a woman in Cabinet for the very first time as the Minister for Defence, and in Julie Bishop of course you’ve got the very first Foreign Affairs Minister who is also a woman. Can we do better? Would I like to see more women in Cabinet? The answer of course Michelle is yes I would. I think I have lots of talented female colleagues who I’m very confident, if given a go, would be incredibly valued colleagues around that Cabinet table.

GRATTAN:

One of the problems of course is that not enough women are coming through the Liberal Party into seats, and especially safe seats. How does the Liberal Party get more women up through the ranks? Is it doing enough in that regard – it’s obviously not successful enough, but is it trying hard enough even?

MINISTER O’DWYER:

I think there has been a shift in more recent times to really focusing on why is it that we don’t have as many women putting up their hand for a life of public service. Are there problems with the process? Are there problems with the job description? Are there not enough people that they can see succeeding in these sorts of roles therefore they don’t necessarily relate to somebody or see somebody in a similar situation to theirs that they could aspire to be like? We know that it’s probably a combination of those sorts of factors so the focus has very much been on making sure that we have a very clear and open process for preselection. In my own home state of Victoria we have a plebiscite option now which means that you can’t tie up votes, that everyone who’s a financial member can in fact vote on the person that they would like to represent them. I think that’s actually a really good start. I also think it’s important for us to keep focusing on this issue and talking about it and ensuring that we look around and see if there are women who could in fact consider themselves for these sorts of roles and tap them on the shoulder.

GRATTAN:

Just before you run off for prepping for Question Time, you’ve obviously got an incredibly heavy load with these two portfolios and all the new things that you have to learn and a very busy agenda in those portfolios. You’ve got also a baby who’s about eight and a half months old – I’m sure many people without such heavy workloads even would be quite interested to know how you manage all that.

MINISTER O’DWYER:

I have an exceptionally good husband. I was once actually having a bit of a chat not long ago to a number of small business women who have been incredibly successfully growing their business and I in fact asked them what they put their success down to and one of them said very sagely, she picked a really good husband and I’d like to say that I think I’ve picked a pretty good one too.

GRATTAN:

Behind every successful political woman is a strong man.

MINISTER O’DWYER:

Indeed. Absolutely.

GRATTAN:

Kelly O’Dwyer thank you very much for being with us today.