Does Australia still have a AAA credit rating?
Ross Greenwood speaks to Treasurer Scott Morrison regarding Australia’s AAA credit rating being reaffirmed by global rating agency Standard & Poor’s (S&P).
Ross Greenwood: Let’s go now to Australia’s credit rating, triple A credit rating. Now, the most important of the ratings agencies. They are all important of course. That’s Moody’s, Fitch, Standard & Poor’s. But Standard & Poor’s has had a negative outlook for Australia’s triple A credit rating for quite some time.
Given a fact that there have been new forecast in recent times about Australia’s economy, where mentioning about Australian dollar picking up to almost 81 US cents on some of those outlooks and even maybe the expectations of interest rates could be raised in Australia sometime this year as a result of the pick up in the Australian economy.
Then quite clearly Standard & Poor’s today affirm Australia’s triple A credit rating is important. Let’s go to treasurer Scott Morrison. Many thanks for your time, Scott. Do you take this has being a tick for the Australian economy?
Interview with: Scott Morrison, Treasurer
Scott Morrison: Well, I do. We think it’s a very good result and with the way they do the ratings at present, effectively after every media statement and budget, they’ll put the rule over where we’re at and they’ll put it over again and it’s come up positive.
In particular, in this review, what they’ve said is that our fiscal performance, our budget performance, our flexibility on the budget has improved. So there’s a clear acknowledgement of what we saw back in December of things getting better and so that’s being recognized in the decision they’ve made.
They’ve highlighted a couple of risks though which ones we’re very familiar with and one of those is they say, well, basically while the government is there keeping us on track to get a budget balance by 2021, the real risk to that is the Senate, which is code for the Labor Party who continue to block attempts to put more savings measures and other measures through to improve the budget.
Ross Greenwood: Okay, but the interesting side, when we spoke the other night. You were all about trying to start to spend some money, in other words looking for tax cuts for businesses, which you’ve actually factored into it-
Scott Morrison: That’s not spending, Ross, that’s letting people keep their own money.
Ross Greenwood: But from a budget point of view it is actually spending money. You would have to agree with that or even individual tax cuts.
Scott Morrison: [crosstalk] collect as much necessarily as much revenue but I mean I’ve never seen tax cuts as spending. I’ve seen it as people keeping their own money. I don’t think it’s a semantic thing but I think we’re on the same page- [cross talk]
Ross Greenwood: Well, I understand —
Scott Morrison: -the impact on the budget and that’s acknowledged.
Ross Greenwood: Okay, we should also clarify one thing for people. You’ll see some reports maybe out there saying that Standard & Poor’s has got Australia on a negative watch when it comes to that triple A credit rating but the important word there is outlook isn’t it because the semantics of it a little bit different aren’t they?
Scott Morrison: Yes, negative watch is that they can perceive a change in the rating of a 50/50 chance, if it’s on a negative outlook, which it’s been on now for quite a period of time. That’s a one in three chance and now we’ve been clearing the hurdles ever since they did that as a government.
Which has been the task of keeping focused on the budget getting the expenditure growth down which we have and as you know in that most recent statement, we’re looking at coming in $6,000,000,000 better, this year, than what we said in the budget and the debt peaking at the lower level and then falling over the course of the next three years.
They’ve seen those numbers and they’ve gone, well, that’s an improvement. You’re keeping it on track but you’ve got to keep it on track. That’s really the message. Now, we’ll stay to the task on that but they obviously raise questions about whether the Senate will work with us to achieve that. We’re just going have to apply ourselves to ensure we stay on track which we’ll do.
Ross Greenwood: When we spoke earlier this week, I did say that I thought that the ability for you to convince the community that businesses, all businesses, need tax cuts. It’s going to be one of the really big political debates going to the next election.
Well the night after, I interviewed the shadow assistant treasurer Andrew Leigh. Now, interestingly, he took a different view of it and everybody wants the economy to grow, everybody wants it to go better. He indicates however that rather than giving very large companies tax cuts that those tax cuts would be better off in the hands of individuals. He says that-
Scott Morrison: He’s not doing that.
Ross Greenwood: – but the thing is he says that what you’re doing is raising Medicare levies and as a result you’ve actually got tax cuts on the middle class of Australia. It’s interesting because the debating point is there that the tax cuts are better off in the hands of individuals —
Scott Morrison: We’re doing both though, Ross, and this is the point I’ve made all week. Middle-income earners will get tax cuts from a coalition government before big businesses will see a tax cut under the plan we have before the Parliament.
Now, this is a very important point. The tax cuts that apply right across all businesses, when it comes to the larger the businesses, they’re not realized for another six years. They’re right down the track. The way we designed the tax cuts for businesses was to start with the small businesses first.
Now, the Labor Party goes around trying to scare people. They said a year ago you can’t keep the triple A credit rating and have the corporate tax cuts. Well what happened today is Standard & Poor’s made it very clear that you can. Because our company tax cuts are fully funded into the budget and the budget getting back into balance projected for 2021 that includes the tax cuts for businesses.
So it’s funded, it’s achievable, it’s pro-growth and we’re at the same time working to deliver the income tax relief for middle-income earners and those middle-income earners will see that long before a business of more than five hundred million or even more would see the tax cuts under the plan we have before the Parliament.
Ross Greenwood: Another victory for the government this week has been the trans-pacific partnership which everybody said was dead in the water. Bill Shorten in particular said it was dead in the water when the United States pulled out. It has now occurred- [crosstalk]
Scott Morrison: -the time and I think what that shows, Ross, is we’re very committed to these. We know the things you need to do to grow the economy. You’ve got to have trade, you’ve got to invest in economic infrastructure, you’ve got to keep your taxes down, you’ve got to bring your budget back to balance, you’ve got to recapitalize our defense industry and make that a way of transitioning some of our manufacturing industries, where in some areas that had to adjust from the closure of automobiles and so on.
We’re investing in defense industry in away we haven’t for generations since the Second World War. There’s a lot going on to drive growth in our economy and because we’re talking about growing the pie the other night and that’s how you do it. When you do that, that’s when you can see wages growth and you know what we’re very passionate about and we’re very applied to it but the Labor Party has a different view they want to put taxes up by $164,000,000 and that’s not going to increase anyone’s wage.
Ross Greenwood: Okay, then you go to the trans-pacific partnership. Capital Economics has done some work on that based on the prime minister’s own information that would deliver real national income growth of $12,000,000 by 2030. Given the fact that that’s in 12 years hence, the fact of the matter is it would work out on average you’d have to say .04% per year. The question is, is the trans-pacific partnership really worth it for .04% per year?
Scott Morrison: Why would you? Why wouldn’t you? You’re going to take every inch of growth you can get, you’re going to take every opportunity you can get. A business doesn’t walk past the customer, who’s he willing to spend money or you’re not going to spend enough.
Our economy has to fight for every inch of growth in the global economy which has got an improved outlook and every trade deal we do and now this comes on top of the China free trade deal, the export agreement with Korea and with Japan, it builds on the ones from many years ago with the US and Singapore and others. It’s adding to all of those things and so each time we do this, we’re opening up the opportunities for the Australian economy.
Where were our economy like say New Zealand and the other economies are different is we’re trading economies. Our prosperity comes from being open and trading. It’s Australia Day tomorrow and we’ve been a trading economy for more than 200 years. Bill English who I mentioned this morning former prime minister of New Zealand. He said for a country like them and it applies to us, you don’t get rich selling things to yourself. It is just practical common sense economics.
Ross Greenwood: For Australian families and even small businesses around the place listening to this program, how will they, from a very personal physical way, see any difference from the trans-pacific partnership?
Scott Morrison: Well, that combined with all the other agreements we’re doing means that the Australian businesses are getting bigger and employing more people. It’s growing our economy and you can’t have a health system that is reliable and there for everybody when you want it, if you don’t have a growing economy. That’s how we got to where we are now. You have to keep growing your economy and do things that achieve that.
Our policies have been driving investment. More than 1,100 jobs created every single day last year. The AIG have come out with a very optimistic outlook for this year. That’s why I’m saying this is a year of economic opportunity and we want to do the things that help Australians realize that opportunity.
We want to reduce their tax burden, we want to keep investing in the infrastructure and services they need and we’re doing that and bringing the budget back to balance and S&P has said, “Well, you’re keeping your triple A, you’re on track but you can’t get complacent about it and frankly the Parliament needs to back you up more than they are.”
Ross Greenwood: Treasurer, Happy Australia Day for tomorrow.
Scott Morrison: To you too, Ross, and all the listeners. Thank you.
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