Hon. J.B.

HOCKEY
Treasurer
TRANSCRIPT
PM AGENDA SKY
FRIDAY, 12 DECEMBER 2014

E&OE.
DAVID SPEERS:

Treasurer, thanks for joining us.

TREASURER:
Great to be with you.
DAVID SPEERS:
Youre delivering your Budget update on Monday; will it show that the deficit has deepened?

TREASURER:
Well, yes it will. We have faced some significant headwinds this year. Obviously the global
economy has come off a bit, iron ore prices have dropped dramatically and we have had some
opposition in the Senate that has made it harder but wherever we have control of the situation,
we have more than offset expenditure with new savings.
DAVID SPEERS:
Will it mean also that the return to surplus in 2018 has to be pushed back?

TREASURER:

It does because fundamentally. We want to keep the economy going; we want to keep it strong.
There have been good signs this year that the economy is strengthening. We want to keep that
momentum going.
DAVID SPEERS:
You did say during the election campaign that, we will own the economy from day one, whether
it is Labors fault or not. I am not afraid to accept responsibility; I am not afraid to be
accountable. So, do you accept that this is your doing as well?

TREASURER:
Well, we are accountable for the economy. I think there is no argument about that and we are
accountable for that fact, for example, this year we have been creating jobs in the Australian
economy at three times the speed of last year. Now, despite that great effort, you are still seeing
the headline unemployment rate nudge up, but if we hadnt of had that speed of job growth
during the course of the year, unemployment would be 110,000 higher today. You would have
an unemployment rate with a seven in front of it, instead of a six. So, we have made some
headway but there is more to be done.
DAVID SPEERS:
I want to ask you how you see the economy how you characterise the economy, because we
are coming out of or have come out of a mining boom and yet unemployment as you say has
crept up to a 12 year high of 6.3 per cent, the Budget is clearly still in deep deficit whether it is
$30 or $40 billion, interest have been, for nearly 18 months, at emergency levels 2.5 per cent;
what is going on?

TREASURER:
The challenge has been that we have seen our export prices come off dramatically. The Terms
of Trade, which reached a peak under Labor, have been coming off dramatically and the best
evidence of that is the fact that iron ore has dropped from $93 a tonne around the time I gave
the Budget, to around $60 a tonne now. Now, we rely more on iron ore export income than
Australia ever has before. It is about a fifth of our exports. So, when you see a dramatic price
fall in commodities, it now hits our bottom line harder than previously. We have got to deal with
that.

DAVID SPEERS:
But do you acknowledge that you used to bag the other side when they blamed the dollar, for
example, which was a big problem during their time.

TREASURER:
Yeah look, understandably but they actually had a lot more revenue than we have now and
certainly they were projecting forecasting, a lot more revenue. Now, if you look carefully at the
challenges, the mistake Labor made was they kept blowing out expenditure against what they
thought would be rising revenue levels. When the revenue didnt continue on that path, they
didnt adjust expenditure. So, what we have had to do is lower expenditure and try and get that
closer to the revenue line. That has proven tough but we have made some headway.
DAVID SPEERS:
You havent been able to reduce expenditure as much as you want; you have had to make
compromises this year. Things like even the Schoolkids Bonus in place for a little longer, the
Income Support Bonus, you have had to delay a bunch of changes to Newstart and family
payments. How much has all of that cost?

TREASURER:
You will see on Monday what the cost to the bottom line is. Those are things we dont control.
The Opposition the Labor Party, has had a big impact on the Budget, there is no doubt about
that. What surprised me most is that they are opposing things that they themselves promised as
savings measures. So, when you are dealing with people that are completely hypocritical in
relation to their own savings and they have the power to block it, and block your initiatives, it
becomes difficult. But, having said all of that, we have a better than expected result on Monday
because we have faced significant headwinds in the Senate and we have faced significant
headwinds with commodity prices.
DAVID SPEERS:
I mean you have got to deal with the Senate youve got, havent you?

TREASURER:

Yeah you do and that is exactly right. Look, people were doubtful that we could get through the
repeal of the Mining Tax Package and we did. They were doubtful that we could get through, at
various points, the repeal of the Carbon Tax Package and we did. There is a number of things
we have done this year that really have made a significant difference to the Australian economy.
For example, just getting rid of 11,000 pieces of legislation, which is 57,000 pages of regulation
and red tape that has had a big, positive impact on business.
DAVID SPEERS:
So, why is business and consumer confidence so low?

TREASURER:
Business confidence isnt low. They take hits from week to week, obviously, and when there is
commentary associated with National Accounts and various other things, it does have an
impact. But overall, I get a sense that business is confident about 2015
DAVID SPEERS:
[Inaudible]

TREASURER:
well, but this week. A week ago it was a long-term average. It varies from week to week but
what I am seeing is that job ads are strong. You are starting to see the flow of a massive
infrastructure program, which we have announced, come into play. Next year you are going to
see cranes all over the country and that is a positive sign of growth. You are also seeing very
good demand for exports, even though prices arent as strong as they should be. Demand for
exports is very strong; volumes are very strong. You are also going to see very strong housing
construction next year, as well.
DAVID SPEERS:
What about some of the measures you havent been able to get through at all this year? I am
thinking higher education reform, in particular it was voted down by the Senate. Will you still
include the $5 billion save from that in the Budget update?

TREASURER:

We are determined to get through our changes, David. It is absolutely essential. Our strategy is
clear and that includes changes to higher education. If we dont reform higher education, we
wont be able to compete with the rest of the world over the next 10, 20 years.
DAVID SPEERS:
But should you include that as a saving if it has been knocked off by the Senate?

TREASURER:
Labor included changes to private health insurance that were knocked off twice by the Senate
before they were approved for the third time. A Budget is a plan and we are determined to stick
with our plan to strengthen the Australian economy.
DAVID SPEERS:
Now, just getting back to the economy, Glenn Stevens is quoted today as saying that the
economy, jobs, inflation, are about where he expected them to be. Eric Abetz yesterday said,
the economy needs a reboot. So, which is it?

TREASURER:
The fact is the Australian economy is fundamentally strong and what we need to do is work with
all the interested parties all those that care, to further strengthen the economy.
DAVID SPEERS:
Does it need a reboot?

TREASURER:
Well, it is not a term I would have used. The fact is that it is fundamentally strong. There is no
doubt in my mind that the Australian economy has a good trajectory and we are saying that on
Monday [inaudible] there is a good trajectory there. We want I think what Eric is saying is, we
have got to do more and yes we do need to do more.
DAVID SPEERS:

So, it is fundamentally strong with a good trajectory the economy; can it afford more spending
cuts right now?

TREASURER:
Whatever spending cuts we announce on Monday, they will have no negative impact on the
Australian economy.
DAVID SPEERS:
So, there will be additional spending cuts?

TREASURER:
There will be savings, there will be savings.
DAVID SPEERS:
New ones that we havent heard about?

TREASURER:
There will be savings, there has to be savings, but they will have no negative impact on the
Australian economy.
DAVID SPEERS:
These are ones not announced [inaudible].

TREASURER:
They are modest savings overall because our expenditure is very modest. So, new spending we
are offsetting with new savings, and the savings we are announcing are not going to have a
negative impact on the Australian economy.
DAVID SPEERS:
Does that mean you will hit the foreign aid Budget again?

TREASURER:

I am not going to speculate on those sorts of things, but we are also not going to be chasing
down the impact of lower iron ore prices on the Budget because that would mean you would
have to have new taxation measures or a massive new round of cuts in expenditure. We dont
think the Australian economy could cope with that.
DAVID SPEERS:
Let me ask you one specific: will you still go ahead with the 1.5 per cent company tax cut due in
July?

TREASURER:
That is our plan and we believe that will actually help to strengthen the Australian economy.
DAVID SPEERS:
Talking about tax, are we going to get the issues paper on tax reform by the end of the year?

TREASURER:
We are certainly working on it. I think we have got to begin the discussion on taxation reform but
I think it is important, David, that in 2015 we have a deeper discussion with the Australian
people a conversation if you like, about how we are going to meet head on the challenges of
the next 30, 40 years. That is going to be a part of our community engagement that is essential
in the course of the next 12 months and that is part of our plan for the Intergenerational Report.
DAVID SPEERS:
This will be a big debate next year tax reform with the White Paper process. Will the
Government take to the next election a tax reform plan?

TREASURER:
We will take a plan to the next election that strengthens the Australian economy. Part of it will be
tax, but there will be number of other initiatives as well. One of the areas that deserves a good
deal of focus is the shape of the Federation; how can we all be more efficient in delivering better
outcomes for the Australian people and Commonwealth-State relations is an essential part of
that.

DAVID SPEERS:
And how open are you to the whole GST debate as part of this?

TREASURER:
I dont see broadening the GST or increasing the rate of the GST as a silver bullet for the
Australian economy at all. I dont have any desire to increase the cost of living for everyday
Australians without being able to properly compensate for it and the Budget has limited capacity
to do that.
DAVID SPEERS:
What about this so-called Google tax of measures to tackle multinationals who dont pay what
they should in Australia? You announced earlier this week that some Tax Office personnel are in
about 10 big companies having a look at the books there. Are you getting closer to announcing
exactly what you will do to tackle this issue?

TREASURER:
It has got to be coordinated global response and this is why the previous Government failed.
They had announcements that they never legislated and they never had any coordinated global
action. We are determined to work with other countries. We have used the leadership of the
G20 this year to get that coordinated global action. We have got a number of fronts that we are
dealing with. Firstly, we are working with the OECD on what is known as the Base Erosion and
Profit Shifting Plan. We are half way through that, which means there are common rules around
the world, particularly in tax havens that ensure that people do start to pay their fair share of tax.
Secondly, we have got Common Reporting Standards, which means that when you open a bank
account anywhere in the world, it has the same information requirements and that information is
on a common platform so that the Australian Taxation Office can see if you are opening
accounts in other jurisdictions. That is hugely important. Thirdly, we have got Tax Inspectors
Without Borders, which is a novel term but important term illustrating that we are all going to
work to send tax inspectors right around the world going after these companies that are not
paying their fair share of tax. Finally, we are going to toughen up further toughen up domestic
rules, so that we ensure that companies that make a profit in Australia, pay tax in Australia and
make sure that they dont try and shift those profits overseas, which is what they have been

doing. So, what we have got to do is engage other countries, including those to where they are
shifting the profit, in the discussion. Ultimately, the big movement this year has come about
because a number of very large countries have worked out that these companies are not paying
tax in their country either.
DAVID SPEERS:
A lot of them arent necessarily breaking laws

TREASURER:
No.
DAVID SPEERS:
That is the issue, isnt it?

TREASURER:
But they are certainly pushing the envelope.
DAVID SPEERS:
You take Apple for example it will pay a lot of money to a foreign partnered company for
[inaudible] but, that is not against the law.

TREASURER:
I dont want to deal with any specific company but there is a moral obligation here for good
citizens and good corporate citizens to pay tax in the countries where they earn the profits.
DAVID SPEERS:
Can you put morality in the law?

TREASURER:
You can give it a damn good shot and I think you will see a lot more action during the course of
2015 as we work in partnership with other countries. I think that is hugely, hugely important. It is

no use Australia acting unilaterally. We have got to work with other countries and in the interim,
we have sent a lot of people into these companies in Australia.
DAVID SPEERS:
Can I ask you: as this year comes to an end, Tony Abbott recently described some of the
Governments performance as ragged; how would you characterize it?

TREASURER:
I will leave that to commentators, but I would just say to you David: it was always going to be
tough this year, always going to be tough, but we have a plan and we are rolling out the plan. If
we hadnt have done what we have done this year, Australia would be in a far worse position
today than it is. Unemployment would be over seven per cent. You would still have higher
electricity prices. You would have a Mining Tax. You would have no free trade agreements,
which are huge opportunities for Australia to grow their exports into Asia, in particular. You would
still have an additional 57,000 pages of regulation and red-tape. You would have nearly a
hundred tax initiatives that were not legislated and ultimately, as Labor always did, you would
have higher taxes, you would have higher taxes. So, we have actually come a long way this
year. It hasnt been easy; it hasnt been easy for Australians. We accept that. We appreciate it
we deeply appreciate the contribution Australians have made and their understanding during the
course of the year. We can always do better. We will work harder in 2015.
DAVID SPEERS:
So, what will you do different in 2015?

TREASURER:
I think there will be more of a conversation with the Australian people about the challenges that
lie ahead and how we all need to work together to address those challenges. This year we were
focused on outcomes rather than process. We made a mistake. I mean, I fully accept that we
could have done more marketing. We could have spent more time explaining what we were
doing to the Australian people and we should have, but we were so focused on getting the
outcomes that strengthen the economy that build more jobs that we neglected the conversation.
In 2015, you are going to see more of a conversation, more community engagement. We are
going to work harder with the Australian people to lay down the plans for our future growth.

DAVID SPEERS:
What about internally- is everything okay? I mean, I saw the Prime Minister today has
suggested that criticism of his Chief of Staff, Peta Credlin is based on gender; do you agree with
that?

TREASURER:
Well look, Ill leave that to others. I have been I have had my head down in the Budget papers
focusing on the challenges that lie ahead. I am not going to participate in the commentary,
David. Tempting though it is, I am not going to join.
DAVID SPEERS:
Final one then: Martin Parkinson, your the Treasury Secretary finishes up today, its his last
day. Are you sorry to see him go and is there a concern that we are getting into a more
American situation where administration changes and so do all the department chiefs?

TREASURER:
No, I think look, I want to say first up, Martin Parkinson is a very honourable man. He has got
a formidable intellect. He has made an enormous contribution to Australia over a number of
years. He has shown great leadership and fortitude in the face of some difficult moments. I like
him as a guy and I really enjoy discussing the world with him but we are moving on. John Fraser
his replacement brings, not only an enormous amount of previous experience in the
Treasury as Deputy Secretary with Paul Keating and a number of others, but he went out to the
private sector, did incredibly well at a global level and now wants to come back and serve his
country towards the end of his career. That is terrific and that is what we are looking for more
of an engagement with the private sector.
DAVID SPEERS:
Well, Joe Hockey, I know you have got to get back into the books for that Budget update on
Monday. We hope you get a break at the end of next week. Thanks for joining us.

TREASURER:

Thanks very much, David, and to all of your audience, Merry Christmas, Happy New Year, and
lets look forward to a very prosperous 2015.
DAVID SPEERS:
Indeed, thank you.

TREASURER:
Thanks very much.
[END]