New Treasurer Scott Morrison has declared the budget has a spending problem not a revenue one and said tax reform must help people “work, save and invest” - the government’s new slogan.
Appearing on Wednesday at his first news conference as treasurer, Morrison flagged he will leave to colleagues the international meetings he would normally attend to focus on being “a home treasurer”, which included the task of selling the benefits of tax reform to the public.
He revealed also that Prime Minister Malcolm Turnbull plans to be less hands-on than Tony Abbott in the day-to-day operation of cabinet’s expenditure review committee.
Morrison said it was important to get on with the savings task. Expenditure was more than 26% of GDP – where it was at the height of the global financial crisis – and this was not sustainable, he said.
Dismissing those who wanted to raise taxes, Morrison said: “I’m interested in talking to people who have ideas how we can get spending under control, because we have a spending problem not a revenue problem.” Growing the economy and achieving savings were the key tasks associated with budget repair, he said.
His rejection of a revenue problem is at odds with former treasury secretary Ken Henry who said on Tuesday that spending was 26% of GDP and revenue was 23.5%, compared with both being on 25% in 2002, when the budget was in balance. “A bit more than half of it is explained by a deterioration in revenue performance, by the tax system not delivering in the way that the tax system has delivered in the past,” Henry said, adding that the situation would require a tax reform package that was revenue positive, not revenue negative.
Shadow treasurer Chris Bowen, responding to Morrison, said both revenue and spending measures needed to be on the table. “There is a revenue issue and a spending issue. The difference between Scott Morrison and I is that I am prepared to acknowledge that fact.”
Stressing that selling the benefits of tax reform will be a major priority for him in the next few months, Morrison made it clear he did not think this had been done adequately so far.
“Tax reform is not an end it itself. Tax reform is not some policy picnic,” he said. The government had to take the people with it in the process. “While there’s been a lot of discussion about the features of the tax system, I don’t think there’s been enough discussion about the benefits of the tax system.
“What I want to focus the public discussion on now is: what are the benefits of making changes to our tax system?” he said. “If we can focus on the benefits of tax reform, then I think there will be a different appetite for it in the community.”
Tax reform had to be about what it was going to deliver for the Australian people. It had to help people “work, save and invest'”.
“What is it going to mean to someone who wants to work more? What is it going to mean to someone who wants to save and invest and participate? If it’s not delivering that outcome, then the option is not one that will get a good hearing from me and the Finance Minister and the Prime Minister,” Morrison said.
“The tax reform agenda should not be driven through some elite process. It should be driven very firmly focused on the outcome we want to see for the Australian people, their families and the economy,” he said.
“I can be very mission focused when it comes to the objectives I’m given. Well, the objective I have here is to help people work, save and invest and adapt and change to the challenges of the economy. That’s my ruler.”
The scope of the current tax white paper process was very broad and covered all the necessary issues, he said. “There has been no change to the tax white paper process at all” under the new leadership.
But Morrison is leaving options on the table, saying he is “not going to get into those games” of ruling things in or out. Tony Abbott ruled out various measures such as changes to superannuation and negative gearing.
Morrison said he would not have the same level of involvement, particularly in the short to medium term, in the international side of the portfolio as had his predecessor Joe Hockey. That would be carried by Cormann and Assistant Treasurer Kelly O'Dwyer. The treasurer usually attends a range of meetings overseas, including those associated with the G20 and IMF. Morrison said his job was to be “a home treasurer, a domestic treasurer, one very much focused on the challenges in front of us”.
The mid-year update of the budget will come out in December, after the economic figures from the third quarter become available.
Morrison said the ERC process would work as it did in the Howard-Costello period. “The Prime Minister has indicated to us that he will be having his strategic involvement in the course of those proceedings and that the agenda and the day-to-day running of the ERC process will be driven by myself as Treasurer, supported by the Finance minister.” Tony Abbott routinely chaired the ERC.
Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.
Authors: The Conversation