10 January 2019
Transcript - #2019004, 2019

Interview with Joe O’Brien, 7:30, ABC TV

Subjects: Productivity Commission Report into Superannuation; 2019 election; and returning the budget to surplus.

JOE O’BRIEN:

Treasurer, welcome to 7:30.

JOSH FRYDENBERG:

Nice to be with you, Joe.

JOE O’BRIEN:

Now, you’ve been reluctant to make any definitive statements today because we’re still waiting or the Royal Commission, but how do you feel on principle, about this key recommendation that involves super accounts being created only for new members of the workforce and then presented with a top 10 list of products? 

JOSH FRYDENBERG:

Well, I think there is a range of innovative and important recommendations out of this landmark Productivity Commission inquiry. It was an inquiry that was requested by the Coalition just over three years ago, and it’s into our $2.7 trillion superannuation sector, which is so vital to our retirement incomes of millions of Australians.

When it comes to the key findings of this report, they do point out that there are significant structural flaws in the existing system and particularly in the default system. And, their big idea is that in future, superannuation should revolve around the member, not the workplace and I think that is certainly worthy of serious consideration.

JOE O’BRIEN:

What about revoking the licence of the funds that consistently underperform, is that fair enough to protect workers from losing out?

JOSH FRYDENBERG:

Well, certainly that is an interesting idea as well that could lead to better outcomes for superannuation members. Because, what we have seen is 93 APRA approved funds being smaller than $1 billion of assets under management, and as a result, they don’t actually get the returns necessarily that some of the bigger funds are getting and they’re not producing the outcomes that members expect.

What the report points out was of the 17 worst performing funds, 10 of those were retail funds, six of them were industry funds and there was one corporate fund. So, I think this report is not about the industry funds sector or the retail funds sector or the unions, it’s about how the whole superannuation sector can do better in protecting the superannuation funds of members.

JOE O’BRIEN:

And one recommendation that the Commission decided was a matter of urgency was banning trailing commissions for financial advisers, that’s a bit of a no-brainer isn’t it?

JOSH FRYDENBERG:

Well again, that is something that we will consider in the context of the Royal Commission report and we’ll also, you know, give great consideration to all 31 of these recommendations.

JOE O’BRIEN:

When you say that that’s something you’ll consider, how can trailing commissions for financial advisers properly be justified as superannuation?

JOSH FRYDENBERG:

Well, again, I think they make some very good points here and trailing commissions is, again, one area where they’ve given us a lot of food for thought and we’ll respond in a formal sense in due course.

JOE O’BRIEN:

We often here the over 55’s saying they would contribute more if there wasn’t so much uncertainty about taxing of super. Fair enough to assume that tax is going to increase in coming years when it comes to superannuation.

JOSH FRYDENBERG:

Well, there’s only one side of politics that is taking to the next election additional taxes on super, and that’s the Labor Party. They have $19 billion of additional taxes in super and they’re actually going to make it more difficult for working mums to have catch-up contributions. They’re going to make it more difficult for people to put money into their super that is non-concessional contribution. They’ve got a whole series of tax increases on super, which could come at a pretty bad time for people, because people want to ensure that they have sufficient funds for their retirement and that they’re not a burden on the government purse.

JOE O’BRIEN:

Now, Treasurer, we’re in the New Year. An election year. Have you locked in an election in May?

JOSH FRYDENBERG:

We haven’t formalised the date. That’s a decision for the Prime Minister and his alone. But what he has been very clear about is that I’ll be delivering a budget on April the 2nd and it will be an important economic document.

The budget is coming into surplus in 2019-20, the first time in more than a decade. We are ensuring the record spending on health and education; we had a major infrastructure plan that is being rolled out around the country and we’re investing significantly in the defence industry and we have been successful in legislating tax relief for millions of Australians, whether they’re income earners or small businesses and of course we did ensure a better and fairer redistribution of the GST.

So, we have got runs on the board. We’ve got a lot more to do, we’re not complacent. The budget will be in surplus and the economy is in good hands.

JOE O’BRIEN:

So, it’s guaranteed now, that there won’t be an election before April?

JOSH FRYDENBERG:

Well, I just made it very clear that I’m looking forward to delivering the budget on April the 2nd.

JOE O’BRIEN:

It did sound like a guarantee though?

JOSH FRYDENBERG:

I can tell you that I am preparing for that budget and there will be a very clear contest when it comes to the economy at the next election. It will be between a Coalition, who have cut taxes, reduced the rate of spending growth, created over 1.2 million new jobs, have a AAA credit rating from the leading credit rating agencies and bringing the budget back into surplus; and the Labor Party who has $200 billion of new taxes, believes that you can tax the public into prosperity, which you can’t and it doesn’t matter what the question is for Labor, the answer is always higher taxes.

JOE O’BRIEN:

When Scott Morrison came to power, the two-party preferred votes 49-51. It’s now 45-55. That move to dump the PM is looking like a huge blunder now, isn’t it?

JOSH FRYDENBERG:

Well, as you know, polls move lots of ways, ups and downs and sideways sometimes. But the reality is there is only one poll that counts and that’s Election Day. And if you look at the history of recent years and recent elections, including some of John Howard’s most famous victories, he came from behind to win and when the public focus on the choice at the next election, between the Liberal and National Party’s Government and that of the Labor Party and their high tax, high spend agenda, the choice will be very clear.

JOE O’BRIEN:

Do you agree with Peter Dutton that Malcolm Turnbull doesn’t have a political bone in his body?

JOSH FRYDENBERG:

I’m not going to get into that level of commentary other than to say I was very proud to serve as a Minister in Malcolm Turnbull’s Government; his Government and Tony Abbott before him, now Scott Morrison are achieving a lot for the people of Australia, and those results are being seen in the economic figures that we have produced in the Mid-Year Economic and Fiscal Outlook at the end of last year.

JOE O’BRIEN:

You might be achieving a lot, but your strategy has clearly been failing badly when it comes to winning over support in the electorate. How are you going to change that strategy to win that support back?

JOSH FRYDENBERG:

We’ve seen in recent weeks a focus on the high taxing, high spending Labor agenda and that’s getting people to focus on the changes to capital gains tax, the 50 per cent increase, the plans for Labor to abolish negative gearing as we know it, their plans to change the income tax thresholds and rates to put more tax on hard working Australians.

That’s their agenda and we in contrast are producing a strong economy that’s delivering record spending on the essential services that people need, and major infrastructure projects around the country, as well as lower taxes. So, there is a very clear contest of ideas and records when it comes to the economy, and we’ll be putting that to the people at the next election.

JOE O’BRIEN:

So that April Budget will be key. There are headwinds hitting the global economy. Is that surplus of $4.1 billion for ’19-20 still looking solid?

JOSH FRYDENBERG:

It certainly is still looking solid and we are committed to delivering a surplus not just in 2019-20, but over the years ahead to bring down net debt from just over 18 per cent of GDP today to 1.5 per cent at the end of the medium term.

This is what Coalition Governments do. They cut taxes, they create jobs and they pay back Labor’s debt. There is, as you say, some cold headwinds in the international economy, particularly around the trade tensions that we’ve seen between China and the US, also rising global debt levels and the impact of the normalisation of US monetary policy and the increased rates there and the impact that’s had on capital outflow from emerging economies.

These are some of the issues that we need to deal with, and also of course, here at home we’ve seen some constrained credit lending that the Government and Reserve Bank and others are very focused on. So, we’re putting forward new innovative reforms and ideas like a $2 billion Securitisation Fund for small business and a Small Business Growth Fund, these are designed to ensure that the engine room of our economy for more than three million small businesses in Australia, actually continue to grow, get good access to finance.

When it comes to the property market, we have seen significant falls, Joe, and that is a result of a number of factors. But one thing is for certain, the independent economists, the property analysts don’t want to see Labor’s plans for a new housing tax because that would come at exactly the wrong time for the Australian property market and it will see that anyone who owns their own home worth less under Labor, and anyone who rents their own home end up paying more under Labor.

JOE O’BRIEN:

And the $10.6 billion in decisions taken but not yet announced from MYEFO, is it fair if the bulk of that goes to tax cuts, without any increase to the Newstart Allowance?

JOSH FRYDENBERG:

Well, I’m not going to run a commentary for you on announcements that may or may not be made in due course. We’ve got Budget on April the 2nd and obviously  a lot will be revealed there and certainly some other things beforehand.

But MYEFO did show that we’re on track to bring the budget back into surplus, that spending growth has come down very significantly, it’s about half of what we inherited and let’s not forget Joe, that when we came to Government, you had unemployment at 5.7 per cent, it’s now down to 5.1 per cent.

You had growth, which was at 2.1 per cent when we came to government is now 2.8 per cent, and we’ve also inherited over $200 billion of cumulative deficits from the Labor Party and we’re now turning the budget into the black.

That’s a very strong economic record. It’s not a trophy to be put up in the cabinet, what it is, is an economy that can deliver the essential services, because it’s strong, that Australians need, deserve and expect.

JOE O’BRIEN:

Josh Frydenberg, thank you for talking to us on 7:30.

JOSH FRYDENBERG:

Good to be with you.