THURSDAY, 9 JUNE 2016
SUBJECT/S: Labor’s 10-year economic plan.
CHRIS BOWEN, SHADOW TREASURER: Well, thanks for coming. Yesterday Labor released a comprehensive 10-year plan for the economy. It brings together the work we’ve been doing over the two years; our plans for investment in schools, renewable energy, infrastructure. Our plan to have Budget repair which is fair. The Government says they have a plan, what they really have is a slogan. And they have a massive corporate tax cut as the only string in their bow. They try to claim that its cost is justified but simply it is just a hit on the Budget. The biggest hit on the Budget being discussed in this election campaign is the Government’s $50 billion corporate tax cut. Labor’s made a different decision. We’ve decided to invest in schools, in infrastructure, we’ve decided to have Budget repair which is fair. Now, yesterday we confirmed that on current projections and forecasts for the Government, the Government and the Opposition would return to Budget balance in the same year, 2020-21. We had previously not confirmed that. Our fiscal trajectory is the same as the Government's. The impact of our decisions sees our Budget return to balance at exactly the same time, whether you have a Liberal Government or a Labor Government.
We've also made it clear that going forward, Budget surpluses will be stronger under Labor because we've made deliberate decisions to invest in not only schools and infrastructure, but also to make difficult decisions on the Budget which build over time; negative gearing reform, capital gains tax reform, cracking down on VET FEE rorts. In relation to negative gearing and capital gains we could have not grandfathered our measures. We could have applied them retrospectively. We didn’t as a matter of principal. That would have seen a much bigger return to the Budget in four years but it means they build over the 10-year period. I'll give you two examples and Tony mentioned these in his debate yesterday; they really sum up the difference of approach between the Government and the Opposition. The Government's corporate tax cut only cost $200 million in 2017-18, but it rises to a cost of $13 billion a year at the end of t he decade. Our negative gearing, capital gains tax reforms make $600 million for the Budget in 2017-18, but they rise over time to make $8 billion a year for the Budget at the end of the decade.
So we improve the Budget structurally and we do so every year under our plans. That is an important point. That is why we are more than happy to release our four-year and 10-year costings and impact on the Budget and the resulting Budget bottom line and we will do so during the course of this campaign. The Government will need to do so as well. But they will only release four-year figures. They don't want to fess up to the fact that their 10-year figures do not add up. They've got a $50 billion tax cut, they've got an Emissions Reduction Fund which is funded only until 2020, even though it will have to exist after that. They can't tell the Australian people that in 10 years' time the Budget will be better off as a result of their decisions, we can.
So we have made difficult decisions. We will release the full impact of all Budget measures. Over the coming days, we will be announcing more savings. Difficult decisions which won't be universally popular but which are necessary to ensure our Budget plans, which are necessary to ensure we can invest in schools, in hospitals, in infrastructure at the same time as having Budget repair. We've said consistently we'll have more savings than spending over the decade. But we will also outline our four-year plans which will see us return to Budget balance in exactly the same time frame as the Government.
Now there's a challenge for the Treasurer today. The Treasurer should admit that his 10-year figures don't add up and he should admit that he won't release 10-year costings for that reason and he should also admit that his four-year figures are based comprehensively on measures which have not passed the Parliament and will not pass the Parliament. We know that the 2014 Budget was rejected comprehensively by the Australian people and the Parliament but there are many measures existing in the 2014 Budget which are still there in the 2016 Budget and which are the Government's return to surplus strategy.
Now, the Government wants us to believe that the Australian people will automatically and magically assume that those changes are fair. Well they won't and neither will the Parliament. We know that despite Malcolm Turnbull's strategic genius of having Senate voting reform and then calling a double dissolution, that there are very strong candidates for the Senate cross bench. For the Government to assume that those $18 billion of measures will pass is fiscal recklessness. As Tony outlined yesterday, many of the measures are meant to start on 1 July, the day before the election. So the Government has to fess up, and this is the second challenge for Scott Morrison today; is the Government really saying they're going to apply those measures retrospectively to 1 July, after the election, they're going to apply those measures retrospectively? If they're not going to apply them retrospectively then their Budget figures are m ythical, are mythical and the Treasurer needs to account for those two things today; the 10-year plan and how much of his four-year plan is based on measures from the 2014 Budget with heroic assumptions that they will pass the Parliament. I'm going to ask Tony to talk a little more about those measures and other aspects of the Budget and then we're happy to take questions.
TONY BURKE, SHADOW FINANCE MINISTER: Thanks, Chris. Both sides of politics are offering structural changes to the Budget. Every year under Labor's structural changes the Budget improves. Every year over the next 10 years under the changes that the Government is proposing, the Budget takes a hit and by year 10, just by comparing those two measures that Chris referred to, capital gains and negative gearing, an $8 billion improvement to the Budget in year 10, the company tax giveaway from Malcolm Turnbull, a $13 billion hit to the Budget by year 10.
The structural difference between what Labor is proposing and what the Coalition has on offer could not be starker. Their Budget is in tatters. Go through the measures that they have already conceded. They will not be following through with in the way in which they were announced on Budget night; the backpacker tax, further education and health cuts, recalibration of their tax plan, review of their superannuation policy, bringing forward the child care policy. More than $1 billion in new spending and added to that the so-called zombie measures which haven't made it through the Parliament for three years, which they're saying magically won't only make it through the new Parliament but will make it through retrospectively to make it through not only before the Parliament sat but before the election itself has even been held.
Scott Morrison needs to be able to stand up today and explain how it is that in just a few weeks their economic blueprint has fallen apart. Their economic blueprint has fallen apart. The Budget they announced to the Parliament has not even made it through to the halfway point of the election campaign.
BOWEN: Thanks, Tony, over to you, folks.
JOURNALIST: Does that commitment you were talking about to surplus stand after you reset the Budget by the first 100 days should you win Government?
BOWEN: I'm not sure I follow that premise of the question.
JOURNALIST: Does your commitment to surplus stand after you reset the Budget?
BOWEN: Yes, we've announced an economic statement within our first 100 days, that will update the Budget forecast and projections, but in terms of comparing the two offerings in this election, you use the existing Budget as the starting point and that's why we've said the fiscal trajectory, the impact of our decision sees us returning to balance the same year as the Government and the difference between our approach as well, remember Scott Morrison said at our debate there will be more cuts after the election, he just won't tell us what they are.
This is deja vu all over again of the 2014 Budget where they announced their election campaign promises eight months after the election. Now we are taking a different approach. We're taking controversial decisions; negative gearing, capital gains tax reform, tobacco, VET FEE HELP, not proceeding with an emissions reduction fund, not having a baby bonus which the Government reintroduced. All these measures - we could have taken a different approach which might have been more popular with some people, but we're calling it as it is.
And yes, we are ensuring that we have a Budget trajectory which sees us return to balance in the same year as the Government.
JOURNALIST: And that stands after –
BOWEN: The difference is that we are telling the Australian people our plans now.
JOURNALIST: And if you do plug in wages growth and iron ore and nominal GDP numbers, why wouldn't the deficit deepen further and why wouldn't it take you longer to get –
BOWEN: Well, what we're doing is, again, I've said very clearly and up front, I do not think that the assumptions the Treasurer has made in his Budget stay in contact with reality. Iron ore prices, wages growth, etc. We will update those forecasts on achieving office through an economic statement, and also begin implementing our election commitments through that economic statement.
That will be a true state of the books. But what we will also do, what we will also do by ensuring, as Tony indicated, our proper improvements to the structure of the Budget means that we can achieve our objective to return to balance that year, but even more importantly than that, continue to improve the Budget very substantially. When Tony and I stand before you with our impact on the Budget bottom line, you will see Labor's measures improving the Budget each and every year.
If Scott Morrison were to have the guts, the honesty to do the same with Mathias Cormann, he would have a graph pointing in a different direction because his corporate tax cuts grow every year and they are a hit on the Budget, a ram raid on the Budget which the Budget cannot afford and which risk our Budgetary situation. Now we've made a decision not to do that. We've got measures which some people don't like, like negative gearing reform, capital gains tax reform which build over time in good quality structural improvements to the Budget. It's the responsible thing to do.
JOURNALIST: The Budget does already have a $48 billion worth of deficit. To reassure the ratings agencies, can give you us an indication of how much more you will add to that?
BOWEN: Well, we've already said that we will, in a fully transparent fashion, during the course of this election campaign, announce the impact of our decisions. We've got some announcements to make tomorrow and on the weekend, so we can't announce the impact of the decisions before we've actually announced the decisions. We'll provide further updates and I won't be doing, Tony and I will not be doing what the Liberals did at the last election and sneaking out on the Thursday before the election, effectively 24 hours before the election is being held with the election advertising ban in place and saying; ‘here are our costings’. We won’t be doing that. We'll be standing before the press gallery, answering questions, having it all transparently there for commentators to pore over, for economists to look at and for journalists to ask us questions about, and we’ll be proud to do so. It will be over four years and it will be over 10. My question to Scott Morrison is why won't you do the same?
JOURNALIST: I guess on that, have you sought to brief ratings agencies on where you’re heading to avoid any sort of shock?
BOWEN: Look, I think the rating agencies understand that in election campaigns both sides make commitments. They will be looking at both of those commitments, I fully accept that. And I would expect that after the election an incoming Treasurer would be talking to the ratings agencies about the Budget, the situation. I mean I've called it out. I've been honest and I’ve said I think the AAA rating is under threat. Scott Morrison won't make that acknowledgment but whoever is receiving the incoming Treasurer’s brief on Sunday, July 3 from John Fraser will be told the AAA rating is under threat. And it's the Government and the Opposition’s job to be honest about that. I am prepared to be; Mr. Morrison thus far is not.
JOURNALIST: Is Labor willing to put the AAA credit rating further under threat?
BOWEN: I don't believe that's the case at all because the rating agencies and I understand there will be commentary about this and I have a lot of respect for economists in the newspaper today. But even as Saul Eslake says it depends on the quantum of the change and we will be outlining all that. The ratings, the AAA rating is a priority for Labor, you would expect it to be because we got it. The three AAA ratings were earnt, for the first time we have all three under a Labor Government, the last Labor Government. So it means a lot to us to protect them and defend them and I've outlined the implications of losing the AAA rating. The cost of Government borrowing going up, the cost of capital in the economy going up and the blow to confidence so that's why we've made the tough decisions. I mean we didn't choose to reform negative gearing for fun, we didn't think it would be popular necessarily w ith everybody. We didn't change the capital gains tax concession because we thought it was a fantastic fun way of spending our time. We didn't have a difficult decision and discussion with many Labor supporters who smoke about the need to increase the tobacco excise. We did those things because we want to invest more in the schools and infrastructure but we want to defend the AAA rating at the same time. And so it remains a priority for Labor to defend the AAA rating and when you see our full Budget figures you will see that that is the case and the ratings agencies will look at the return to the balance year, exactly the same as the Government and then they will look at what happens next and they will see a stark difference in Labor’s approach; surpluses building more substantially and more quickly. The Government won't be able to make that claim.
BURKE: Decisions of that nature also always have to have reference to the final Budget outcome, not simply the fiction that a Government puts forward on Budget night. The challenge that the Government has, with respect to the AAA credit rating, is they cannot deliver in a final Budget outcome, nor are they saying now with the policy changes they've flagged, that they will deliver a final Budget outcome that in any way reflects the Budget. They are more than $10 billion out in their figures from what they put in the Budget to what they are now taking to the Australian people. The Government doesn't want to have that conversation; Scott Morrison will duck and weave every time that is put to him. But when you combine measures that they will never get through the parliament with measures that they have already said during this campaign they are changing like superannuation and like the backpacker tax; then you see th at the Budget is not the measure that the Government is in fact taking to the election. They are taking something many billions of dollars’ difference to that.
JOURNALIST: Just clarifying, do you have any reason to or will you go to any rating agencies before the election?
BOWEN: Look, I don't think that's necessarily appropriate for a Shadow Treasurer to do. Treasurers interact with the rating agencies, we are in touch with them from time to time as a matter of course and Moody’s has already warned for example that the AAA rating is under threat. I acknowledge that, the Treasurer seems to refuse to acknowledge it. Moody’s said revenue measures are necessary in the Budget, we’ve acknowledged that. The Treasurer, despite adopting some of our revenue measures as a rhetorical point, refuses to acknowledge it. So we are the ones who take the warnings of the rating agencies very, very seriously and we have incorporated that in our thinking.
As I keep saying in this press conference, as a result we have made tough decisions for Budget repair because we will defend the ratings that Labor earnt in the middle of the global financial crisis. We got all three for the first time ever that Australia had all three AAA ratings from the agencies and so that is an important part of Labor’s legacy to defend and it's important for the nation that it is maintained and it's not easy. It's not easy to maintain those ratings but it will be a priority for a Labor Government and we've had the honesty to say we think they are under threat. The Treasurer has not.
JOURNALIST: Just a question on business. Some business groups are complaining about Labor’s stance on business tax cuts. Is there any room to move, would you agree to increase the definition of a small business?
BOWEN: Hold the front page; business wants to pay less tax. I don't think that is a great revelation, I'm sure you want to pay less tax too but you can't take out ads in the newspaper to justify. Yes, you’re nodding; you'd like to pay less tax. Thanks for the endorsement. But you can't afford to take out ads in the newspaper to argue for you to pay less tax.
We will act in the national interest and the Budget can't afford these $50 billion worth of corporate tax cuts. It's not an ideological thing for us, it's a matter of hardnosed prioritization. We choose to invest in schools and protect the AAA rating. The Government chooses to spend $50 billion on a corporate tax cut which is the biggest hit on the Budget being discussed in this election campaign. Much bigger than any commitments we are making. So they need to justify that, I regard that as fiscal recklessness in this environment. Now we will have good relations with business, we’ll work closely with business. We will work together on a plan to boost economic growth; the plan is in our document. Renewable energy, investment in infrastructure, schools, all things which are important to business but we will act in the national interest not vested interest. I understand business arguing for a tax cut but the Mums and Dads working in a factory would like a tax cut too, they can't argue for it on the front page of the newspaper and we will act in the interest of all.
OK, thanks for your time.