7 November 2018
Transcript - #2018059, 2018

Interview with Michael Rowland, News Breakfast, ABC TV

Subjects: Labor’s property tax; Grattan Institute report on retirement; Labor’s retiree tax; Prime Minister Scott Morrison’ trip through Queensland; Malcolm Turnbull; and United States Ambassador to Australia.

MICHAEL ROWLAND:

Treasurer, good morning.

JOSH FRYDENBERG:

Nice to be with you.

MICHAEL ROWLAND:

So, what do the figures say?

JOSH FRYDENBERG:

These figures show that 1.3 million people currently negative gear, they will all be worse off under Labor's policy to abolish negative gearing as we know it because when they sell their property, they will be selling it into a market with less buyers. 

We know that everybody who rents their home today will pay more for their rent as a result of abolition of negative gearing as we know it and the changes to the capital gains tax discount and Michael, these are not rich people who necessarily negative gear, 58,000 teachers, 41,000 nurses, 20,000 police and emergency personnel.

And this policy designed by the Labor Party was designed at a time when the property market was increasing, but now the property market is coming back to more sustainable levels, which the Reserve Bank of Australia has welcomed and the Government has welcomed, it is exactly the wrong time to take a sledgehammer to property prices.

MICHAEL ROWLAND:

But the property market has come down under your watch, the house prices have fallen under your watch and we have economists, like Paul Bloxham from HSBC, saying Labor's policy, if it was ever implemented, would have less impact now because the heat has been taken out of the market?

JOSH FRYDENBERG:

The prudential regulator has introduced some reforms which we have supported, which has changed the dynamic away from investor-led growth to more owner-occupier led growth and we have seen over 100,000 first home buyers get loan approvals over the last year, the highest level since 2009. But, this trend downwards is coming in a sustainable way and in a managed way.

If you smash negative gearing and capital gains tax discounts, as the Labor Party is proposing to do, it will exacerbate weakness in the housing market and decrease the value of people's homes and increase rents for those struggling.

MICHAEL ROWLAND:

All these figures are quoted in various electorates, all of these people won't be affected by Labor's policy because the party has made it very clear they'd be grandfathered, there would be no impact on people who currently negatively gear. So, are these figures in a way a bit meaningless?

JOSH FRYDENBERG:

This is a myth put forward by the Labor Party because if you abolish negative gearing as we know it and you halve the capital gains tax discount, which is Labor's policy, what will happen is that these people will be selling their property into a market with less buyers and even for those who are going to invest in the future in new-build assets, whether it’s apartments or houses, will be doing so with half the capital gains tax discount that they currently enjoy.

And Michael the point is Labor can't explain their own policy. Bill Shorten tells you prices will go down, Jim Chalmers says prices will go up and Joel Fitzgibbon said it would neither go up or down.

MICHAEL ROWLAND:

That's assuming people who currently negative gear existing policy would sell, want to sell their houses, they are a long-term investment for many investors.

JOSH FRYDENBERG:

They are, but ultimately, they do sell it because that's an investment.

MICHAEL ROWLAND:

Do you really see this is going to be a key flashpoint at the next election?

JOSH FRYDENBERG:

I do, together with Labor's plans to put an extra tax on retirees with the changes to the franking credits, together with their proposals to wind back our already legislated income tax cuts, as well as their increased taxes on family businesses and their new electricity tax. This will be a big battleline in the upcoming election.

MICHAEL ROWLAND:

You mentioned retirees. We have been talking a fair bit about them this morning in the wake of the Grattan Institute report that shows we are worrying too much about retirement, that based on their modelling, most Australians can expect to retire on 91 per cent of their pre-retirement income, is that being a bit too rosy in your view?

JOSH FRYDENBERG:

Well actually, Treasury analysis is not too dissimilar from the Grattan Institute in the sense that those who are currently in employment will be better off into the future, but superannuation is one aspect of people’s retirement planning, obviously voluntary savings, the aged pension are all other parts. But, if you want to help retirees, then don't slam them with a new retirees tax.

MICHAEL ROWLAND:

Sticking on the Grattan Institute report, they are also calling on the Government, for both parties, to abandon the planned increase in the compulsory super levy to 12 per cent, is that a good idea?

JOSH FRYDENBERG:

No and we’re not proposing to…

MICHAEL ROWLAND:

Why isn’t it a good idea?

JOSH FRYDENBERG:

Well, because I think people want the certainty when they are planning for their investment, that's legislated, and planning for their retirement.

MICHAEL ROWLAND:

The Prime Minister, as we know, is on the so-called ScoMo express in Queensland. It appears a lot of your colleagues aren't too sure about this, the use of Aussie slang, the use of the baseball caps, the cheesy YouTube videos. Phil Coorey in the Financial Review quotes one unnamed Liberal MP as saying this morning it is going down, quote, like a turd in a well. What do you think of the tour?

JOSH FRYDENBERG:

That is a ridiculous statement. I think it’s a great tour, I think he's reaching out to these communities, he is joining my colleagues, I speak to him daily. He's having a very warm reception wherever he goes.

He's making important announcements for example in Townsville about water supplies and our big investment there. So, we are absolutely committed to the people of Queensland, we’re committed to the people across the country, people like what they see with Scott Morrison and they will see more of him between now and the election.

MICHAEL ROWLAND:

The former Prime Minister Malcolm Turnbull gets one hour with Tony Jones on Q&A tomorrow night. Are you a bit nervous about what he might say and what scores he might seek to settle?

JOSH FRYDENBERG:

No and I'll leave that viewing and that commentary to people like yourself, Michael. I won't be switching on. But no doubt I’ll be reading about it.

MICHAEL ROWLAND:

You can understand, though, if he has to- if he would want to get a few things off his chest, given the accusations directed at him by a lot of your colleagues over the outcome of the Wentworth by-election?

JOSH FRYDENBERG:

The Wentworth by-election has come and gone. Our terrific candidate there Dave Sharma only lost by 1,800 votes in the context of what was a very difficult campaign. Obviously, we would have liked to have been on the winning side – and we weren't. But, we will deal with Kerryn Phelps as a crossbencher in the new Parliament.

Malcolm Turnbull has a lot to be proud of in his achievements as Prime Minister. And in terms of some of the things that he had under way like the Free Trade Agreement between Australia and Indonesia, which will create jobs and cement the bilateral relationship, that has now concluded negotiations and we’ll have a signing before the end of the year, as well as a number of other policies that he can take credit for and we are now bearing the fruit.

MICHAEL ROWLAND:

Just before you go, another important relationship Australia has is the one with the United States, we have news now of the Ambassador-designate – Arthur B Culvahouse…

JOSH FRYDENBERG:

Junior.

MICHAEL ROWLAND:

Junior. Junior, let’s get the Junior in. From what you’ve heard, is this going to be a good appointment by the Trump administration?

JOSH FRYDENBERG:

Well, he seems well respected in Washington, close to the President, which is really critical. I remember when our own Sir Robert Menzies sent Owen Dixon to the United States to be Ambassador for Australia, he made the point that if you have an ambassador over in another nation's capital who could pick up the phone to the Prime Minister, you really have an advantage and in this case, it looks like Donald Trump is sending a person to Canberra who has that relationship with him.

MICHAEL ROWLAND:

It's taken two years, I guess we got there in the end.

JOSH FRYDENBERG:

Yeah, we did. And our relationship goes from strength to strength at both the political, strategic and economic levels.

MICHAEL ROWLAND:

Okay, Federal Treasurer, Josh Frydenberg, thanks for dropping in this morning.

JOSH FRYDENBERG:

Good to be with you.