4 October 2018
Transcript - #2018034, 2018

Interview with Alan Jones, Breakfast, 2GB and 4BC

Subjects: GST distribution; Great Barrier Reef Foundation

ALAN JONES:

Treasurer, good morning.

JOSH FRYDENBERG:

Nice to be with you Alan and glad to hear you’re taking up fencing.

ALAN JONES:

That’s enough out of you. Isn’t it true, I mean, I know you’re new to this and most probably as hypnotised by some of it as all of us, that it is a ridiculous GST formula, which punishes states which perform and rewards the duds.

JOSH FRYDENBERG:

Well, the whole idea is to enable all our states and territories to provide a level of services which we’re proud of.

Now, John Winston Howard and you and I are both a fan of him, was on your show back in November 1998 and you put to him this question about the GST formula and he said, “I’m an Australian and as far as I’m concerned, all Australians should be treated equally no matter where they live. I’m not interested in arguments from the State Premier that he’s somehow carrying someone else’s load.” And that’s when he was talking about Bob Carr.

ALAN JONES:

Right. Good point. And now if I could just interpolate there; you then take a state like New South Wales, this is the beef, who are arguing that on the last figures I saw, and people are listening to you in New South Wales, they’re listening to you all over Australia.

But 7 million people in New South Wales are paying GST and the last figures I saw, $493 million from New South Wales goes to Queensland, $615 million goes to the Northern Territory, $420 to South Australia under this silly expression Fiscal Equalisation, which you’ve explained that well.

John Howard saying everyone should have an equal standard of living and so on. But New South Wales are victims of their own success because this is a state, which under Michael Baird economically and Gladys Berejiklian accepted significant economic discipline.

So, here they are now with the fastest economic growth in the country; the lowest unemployment rate; they’ve got a surplus; they’ve got debt, which is 0.1 per cent of Gross State Product. Queensland’s is almost 10 per cent. Sixty three per cent of the jobs created in Australia are created in New South Wales; New South Wales has got 30 per cent of the population.

So, while John Howard is right, it seems that states though who badly manage themselves get the dough that has been raised by New South Wales.

JOSH FRYDENBERG:

Well, it is true that the large states of Victoria and New South Wales get under 100 cents back in the dollar in the GST. But we got to a ridiculous situation where Western Australia was getting just 30 cents in the dollar and you had Tasmania, which has one-fifth of the population of Western Australia and the Northern Territory, which has one-tenth of the population of Western Australia, getting more money than Western Australia.

Now, when it comes to New South Wales, back when the GST first came in in 2001, New South Wales got $7.3 billion from the GST. This year, it’s getting $17.8 billion, next year it’s getting $18.4 billion.

And I have the numbers before me, which were based on the data provided by New South Wales, data that was put together by the Productivity Commission that shows New South Wales, under Scott Morrison’s new plan will be $351 million better off between now and ‘26-27.

ALAN JONES:

But you saw the- I mean this, I’m sorry to our listeners out here, but this is a very, very important debate because it is about the GST and it is about this stupid expression about Horizontal Fiscal Equalisation, which the Treasury…

JOSH FRYDENBERG:

That’s one to keep you up at night.

ALAN JONES:

Oh isn’t it. But you explained very well, I might add, the notion that all citizens in Australia, wherever they live should have equal opportunity that is, with relation to schools and nurses and police and roads and all that sort of stuff.

JOSH FRYDENBERG:

Correct.

ALAN JONES:

But nonetheless, did you- you saw that slide on Tuesday night, which argued that Queensland, New South Wales, Victoria, South Australia, Tasmania and the ACT now could be between $9 and $14.7 billion worse off by 2026.

Now, you’ve got political problems in Western Australia, not of your making, but certainly of the previous administration’s making. I mean, and you’re in and trouble with an election coming up, so here’s an attempt to give Western Australia what they’re asking but now you’ve got the rest of the states up in arms. How does that work out?

JOSH FRYDENBERG:

Well, we don’t actually accept those numbers because the Productivity Commission itself has taken data from the states and territories and worked out what would be happening in the years going forward. Now, we’ve done two things for your listeners.

The first thing is we’ve said that we don’t want a repeat of 30 cents in the dollar, so we’re going to put a floor at 75 cents in the dollar. The other thing that we’ve done is we’ve taken $9 billion of additional money…

ALAN JONES:

Sorry, just come back to the floor. So you won’t get less than that?

JOSH FRYDENBERG:

And that applies to any state, not just Western Australia. Now the…

ALAN JONES:

Right, just so, say that again? So, no matter how much GST is raised, you won’t get- any state, no state will get less than 75 cents in every dollar…

JOSH FRYDENBERG:

Cents in their dollar.

ALAN JONES:

…of GST raised.

JOSH FRYDENBERG:

Correct.

ALAN JONES:

So, your maximum subsidy would be 25 cents in the dollar?

JOSH FRYDENBERG:

Well, the loss- the most you could lose…

ALAN JONES:

Would be 25 cents in the dollar, gone.

JOSH FRYDENBERG:

Now, the other issue here is we have put an addition $9 billion to the states and territories. That’s money out of the Commonwealth Budget. That’s money we could have otherwise been spending on defence, or on border protection, or on roads, or Commonwealth infrastructure.

We’ve decided we want the states to be all better off. So, here’s $9 billion and what is more, we will be putting an additional billion dollars from ‘26-27 in perpetuity and now that number grows over time. So, the states are actually getting more money from us, they’re getting more money from the public because the population is growing, we’ve applied the GST to online purchases, we’ve done a whole lot of other things.

The states are going to be better off based on the Productivity Commission…

ALAN JONES:

That being said, nonetheless, here you are, you’ve made a tremendous start, you and Scott Morrison, and now there’s headlines everywhere saying basically this Liberal Government is ripping people off. This is a very difficult argument to win.

See at the end of the day, the argument you’ve got to address is that states say if they’ve taken reformist- I mean, you take this bloke Andrews in Victoria. I mean here he is wanting to massively subsidise renewable energy, whack up the price of electricity.

I mean, people say this is nonsense stuff. You had that fool Weatherill in South Australia doing exactly the same thing. You’ve got a massive growth of the public sector in Queensland…

JOSH FRYDENBERG:

Correct.

ALAN JONES:

…but then, then you’ve got Baird and Berejiklian the New South Wales reformist stand, improve the economy, improving the infrastructure and some bloke says well okay, well done but I’m sorry, we’re going to give your money to someone else.

JOSH FRYDENBERG:

Well, Alan, what I say to all your listeners in New South Wales and Queensland is that in the Commonwealth Government, in the Coalition Government, they have a very generous partner. New South Wales gets 45 per cent of all its revenue from the Commonwealth and 23 per cent of that is the GST.

So, we stand ready to assist the people of New South Wales, financially with hospitals, with school funding, with road funding and there’s plenty of good examples of that as well as ensuring that they get a greater share of the GST going forward.

ALAN JONES:

But were you frightened by the argument that, and did you discuss this, that Western Australia as I understand, were contemplating a High Court constitutional challenge on the basis that the Commonwealth may not discriminate between the states in making payments to them because the draft constitution gave exclusive power over taxes, which were then collected and so on, and there was a balance between what the Commonwealth kept and what the states kept. Was that likely and was that likely something that you had to head off at the pass?

JOSH FRYDENBERG:

That wasn’t my motivation. What my motivation and particularly, Scott Morrison, who was Treasurer at the time when he led this reform and commissioned the work from the Productivity Commission, was to get a fairer, more sustainable deal. You see, the end of the day…

ALAN JONES:

But WA, and this is all to rectify some imbalance in WA and you’re right they were getting 30 cents in the dollar of their GST dough and that was very unfair. But weren’t WA also getting, per capita, more special purpose payments from the Commonwealth than any other state?

JOSH FRYDENBERG:

Well, WA have not done well out of the Commonwealth when it came to these payments and what we were seeing was the actual GST system and its integrity being threatened. So, we’ve worked with the Productivity Commission; we’ve taken the data from the states; we’ve got a much more sustainable deal going forward.

ALAN JONES:

But nonetheless, the states have got a vote on this and that’s the problem…

JOSH FRYDENBERG:

No…

ALAN JONES:

…and it’s clear that they’re not…

JOSH FRYDENBERG:

No, that’s not correct. I just have to correct you on that one. When it comes to changing the rate or the base of the GST, if you wanted to lift it up or down or you want to take it off feminine hygiene products as we did yesterday or extend it to other things, you do need the approval of the states and the Commonwealth and the territories.

But when you change the distribution; that can be done by the Commonwealth and that is what we are proposing to do.

ALAN JONES:

So, therefore you will do it independently of the headlines today.

JOSH FRYDENBERG:

Correct.

ALAN JONES:

Right.

JOSH FRYDENBERG:

We will take it through the Parliament and this will be a test of Bill Shorten’s credibility because, you and I have discussed this before, he says one thing to the baristas of Batman and he says another to the miners in MacKay, he says one thing to the people of Penrith and he says another to the publicans in Perth and…

ALAN JONES:

That’s very alliterate of you; you’ve been practising, I can see.

JOSH FRYDENBERG:

No I haven’t.

ALAN JONES:

Yes I think.

JOSH FRYDENBERG:

But the point is, in Western Australia a few weeks ago, Bill Shorten turned up with their Premier Mark McGowan, a Labor Premier and said he supported the Coalition’s reforms to the GST and supported the legislation. Let’s now see if he walks the talk and that will be a test of his character and credibility.

ALAN JONES:

Okay, just one final question, which is, I think we know the answer. But I just want to raise this issue. If you were to raise the GST to 15 per cent and got rid of existing exemptions on food and education and health and so on, and we’ve got terrible debt, you could boost revenue by more than $70 billion a year and abolish all stamp duty on property sales, which drives home purchasers nuts.

Now, New Zealand’s got a GST of 15 per cent, Germany 19 per cent, France and England 20 and our 10 per cent is one of the lowest GSTs in the world. There are 33 countries with similar tax structures to us, they’ve got an average GST of 20 per cent.

Do we need a significant public debate? I am not asking you to commit to increasing or decreasing. Don’t we need a significant debate though about the way in which revenue is gathered in this country?

JOSH FRYDENBERG:

Well, we continue to look at the tax system. I am not going to open that can of worms on the GST today.

ALAN JONES:

No, no, I don’t expect you to. But nonetheless, we raise, our GST only covers 47 per cent of consumption. New Zealand’s covers 97 per cent.

JOSH FRYDENBERG:

Well, there’s no secret that back in the day when it was negotiated, the then Coalition Government would’ve liked to have extended it more broadly but the reality is, there was a deal that was done, it’s now stood the test of time.

What our focus is on is helping small and medium-sized enterprises across the economy, more than 3 million of them will benefit from the legislated tax cuts. They employ around 7 million people across the country. But again, Bill Shorten is wanting to wind back our legislated tax cuts and every small business owner listening to your program that has a turnover of less than $50 million, will pay more for their tax, more on their business as a result of Bill Shorten if he ever gets his chance in the lodge.

ALAN JONES:

Yeah, just on that, I wish you were a tax cut. Are you contemplating, you’ve got a mini-budget, are you contemplating making a tax cut? It’s not a tax cut, it’s a tax rebate. They won’t get anything until July next year. That’s after the election. Would you give consideration to the rebate becoming a tax cut so that people are getting, albeit, 10 bucks a week, but they’re getting it now?

JOSH FRYDENBERG:

Well, you and I talked about this last week and I explained how they will get, when they do their tax return at the end of the year, up to $530 better off. This is legislated. We’ve done it, we’ve got it through the Parliament. Bill Shorten wants to increase your tax on your income; increase your tax on your property; increase your tax on your business; and for all your retirees listening, or wannabe retirees, they will get hit by his tax…

ALAN JONES:

Yeah, well, I’m going to look at that with you down the track.

JOSH FRYDENBERG:

Let’s do that.

ALAN JONES:

Okay, which I will. I just want to raise this. Now, look, how can you still be giving $444 million, have you given this money yet, to the Great Barrier Reef Foundation? The public are absolutely outraged by this and now the Great Barrier Reef Foundation have indicated they were in talks with the Federal Government before they got the dough and they wanted $5 million and they got $444 million.

Now, out there, they’re saying, look we want- you’ve got to give people a reason to get excited about the Coalition, to man the booths, to be talking at the tuckshop about voting Liberal. Can’t you say, I’ve listened to you, I know you’re upset; we’ll give them the $5 million they asked for and we’ll renegotiate this?

JOSH FRYDENBERG:

Well Alan, with the greatest respect, you’re entitled to your own opinions but not your own facts. Now, when it comes to the Great Barrier Reef, the $5 million that we were giving was completely separate to this plan. That was a partnership; it involved Lendlease, the Foundation and was designed for a specific Reef restoration project.

What we did with the $443 million is we took the advice from the…

ALAN JONES:

Where’d the figure come from? Where? Just made up…

JOSH FRYDENBERG:

Well, what…

ALAN JONES:

Made up figure.

JOSH FRYDENBERG:

The 443 was what we decided to put into the Reef and improve the water quality…

ALAN JONES:

Can I put my hand up? I asked for 5 and I get 444. This is the best deal in town.

JOSH FRYDENBERG:

There are 64,000 jobs. There are…

ALAN JONES:

You’re making figures up.

JOSH FRYDENBERG:

…64,000 jobs that depend on the Reef.

ALAN JONES:

You’re making it up now.

JOSH FRYDENBERG:

No, can I explain something to you?

ALAN JONES:

No, well look, we’ve got to go. We’ve got to go. We’ll be back next week. God I hope we can get over this in a hurry because I want to look at this whole issue of tax next week, so leave it there for now.

JOSH FRYDENBERG:

Let’s come back to the Reef because I tell you what, your listeners in Queensland and around the country care about this natural wonder of the world.

ALAN JONES:

Good on you. Alright, thank you Treasurer.