Do small business deserve fast-tracked tax cuts?

Ross Greenwood speaks to Prime Minister Scott Morrison after announcing a new plan which would see companies with an annual turnover of less than $50 million have their tax-rate lowered to 25 per cent within four years.

Introduction: Do small business deserve fast-tracked tax cuts?

Ross : Plenty more going on around the place, let us however, go to our special guest on the program this evening, the Prime Minister, Scott Morrison. Many thanks for your time, Prime Minister.

Scott Morrison: Good day Ross. Good to be with you.

Interview with: Scott Morrison, Prime Minister 

Ross Greenwood:  Great, it’s always great to have you on the program. I want to say for what reason have we bought forward these small business tax cuts?

Scott Morrison:  Because we believe small business deserve it. I think they work very hard and we want to see them pay lower taxes. We want them to keep more of what they earn so they can invest it back in their businesses, invest it in their employees, invest it in developing new products, new markets and continuing to drive the incredible job growth we’ve seen which they’ve played such a key role in.

We were unable to get the full enterprise tax plan through the Parliament, and so we’ve taken, not proceeding with that and invested that back into small and family-sized businesses up to a turnover of around 50 million annually.

That’s all going to happen five years earlier, and our government will seek to legislate that next week. That would mean in the next term of Parliament, we would have those businesses paying a 25% tax rate and under Labor, they would force them to pay a 27½%-

Ross Greenwood:  Of course, the difference there is that Labor indicates that it wants to put more of the tax cuts into the hands of individuals, personal tax cuts.

Scott Morrison:  No.

Ross Greenwood:  That’s what they’re saying again today. [crosstalk] You heard Bill Shorten out there saying that their preference would be they may very well look at this proposal, but they would prefer to see more of the tax cuts go towards individuals rather than going to businesses.

Scott Morrison:  No, that’s not the case. What they want to do is cut in half, the $144 billion personal income tax cuts that we’d legislated through the Parliament, which includes abolishing a whole tier of the tax system, which means that 94% of Australians will pay no more than 32½ cents in tax. Labor want to abolish that. They actually want to chop up personal legislative tax cuts in half.

What they want to do, [chuckles] Ross, is just spend more money. They can’t control their spending, so they’re going to put taxes up households and businesses to make savings, so they can pay the highest taxes.

Ross Greenwood:  Couple of other bits and pieces. Savings from the big business tax cuts were around $1.3 billion. However, some of the reports today indicate that moving forward, these tax cuts to smaller businesses, will cost the best part of $3.2 billion over four years. Where’s the difference in the money come from, around $1.9 billion?

Scott Morrison:  Sorry, I’ll let you finish, sorry.

Ross Greenwood:  Around $1.9 billion.

Scott Morrison:  No, it’s higher than that. This is costing just over 3.2 over the forward estimates and round about just over two is what we’re saving, by not proceeding with the full enterprise tax plan, but over the 10 years, this is costing us just over 10.3 billion, and as you know, the other one was costing around about 35. Over the medium term it is fully covered and when we get to the third and fourth years of the forward estimates, then we are back in our surplus position. These latest changes won’t come into effect in 2021. That’s when the budget is back in balance.

Ross Greenwood:  All right. I was going to ask you about that, because a lot of people would say, “Why do any of this, until the budget is back in surplus and the debts are under control?” A lot of people are still concerned about the debts of the Australian Federal Government and they’re conscious of the fact that maybe there’s not as much money around and maybe we don’t really have, if you like, the reserves if there is an economic shock. We’ve seen the stock market fall very heavily today and some people are concerned that there could be a shock down the trail.

Scott Morrison:  That’s why you want businesses not tied down with higher taxes and this next change won’t happen until the budget is back in a surplus. That is predicted to happen in 2019/20, and this kicks in the following year in 2020/21. What you want, and I said this at the event I spoke at today, yes, there is that uncertainty, so why, with additional pressure, would you want to be putting even more pressure on small and family businesses, by forcing them to pay higher taxes to the government? You want them to be in a position of having greater flexibility, so they can keep staff on and they can keep their businesses churning.

Ross Greenwood:  I was going to say that today, at that function you were at, was also the former Treasurer, Peter Costello. Here’s just a little of what he had to say.

Peter Costello: When Malcolm Turnbull launched a challenge against Tony Abbott, for the leadership of the Liberal Party, he said two things, not just one thing, two things. He said the coalition had lost 13 years polls in a row and they had no economic narrative. I would agree with that, but then I kept on waiting for the economic narrative to come, [laughter] and I’m not sure that it did. I think this is the problem today. I’m not sure what the narrative is amongst those who are making these decisions for us.

Ross Greenwood:  You were the Treasurer. You’re now the Prime Minister. Is it embarrassing to hear that from a coalition Treasurer, who’s considered one of the finest treasurers in our history?

Scott Morrison:  I’ll tell you what did happen, since that change. More than 600,000 people got a job. That’s a pretty strong narrative and we legislated to reduce taxes for small businesses. We legislated to reduce taxes for personal income, right across the board. We saw record jobs growth for youth employment, at the highest level we’ve ever seen in our economic history.

But I think the point Peter’s trying to make is this, and this is what I was addressing today in my speech today, which he was at, and he warmly received, I must say. That was that we’ve talked a lot about what we’ve achieved. I was just mentioning some of those things to you.

We’ve also got to tell people why do we want to see business taxes lower for the small and family businesses? Because we know that people who have a go should get a go. That’s what fairness should mean in this country. It’s about the why, not just the what. That’s what I’ve been spending the majority of my time doing since becoming Prime Minister, when I’ve been out talking to people, explaining to them what we believe.

We believe that people should keep more of what they earn. We believe that the best form of welfare is a job. We believe that the promise Australians make, is to make a contribution not take one, and we believe that you don’t have to drag people down by taxing them more. Tax other people less.

Ross Greenwood:  You don’t understand politically surely, Prime Minister, that if you’ve got the former Treasurer coming out and saying that the Turnbull– That Morrison government had no economic narrative, and that’s supposed to be one of your strengths, that clearly is not going to help you politically.

Scott Morrison:  I don’t share Peter’s view. I respect Peter. I think he was Australia’s greatest ever treasurer, but that doesn’t necessarily mean that he and I have to agree on everything. What I do know as a Treasurer, and working with the previous Prime Minister, we achieved the single largest growth in jobs in a year that we’d ever seen on economic record. I know that what we achieved on the budget is the lowest rate of expenditure growth of any government in the last 50 years. The last 50 years. That included that time as well, by the way.

Ross Greenwood:  One of the other thing I want to take you to, is the fall in the stock market today. Now that shows nerves and perhaps potentially volatility around the place. I do note also that the US President, Donald Trump, has made a very pointed conversation towards the US Federal Reserve, the equivalent of our Reserve Bank. Here’s what he said.

Donald Trump: I think the Fed is making a mistake. They’re so tight. I think the Fed has gone crazy. You could say that that’s a lot of safety actually, and it is a lot of safety, and it gives you a lot of margin, but I think the Fed has gone crazy.

Ross Greenwood:  He thinks the Fed has gone crazy by putting up interest rates. He says that’s hurting the US economy. The US economy clearly has balked today through the stock market as a result of partly higher interest rates. Do you imagine that you, as the Prime Minister, would ever talk about the Reserve Bank or the Reserve Bank ever in those terms?

Scott Morrison:  No, I wouldn’t and you know I wouldn’t, Ross. I certainly didn’t when I was treasurer. It’s not for me to offer commentary on other leaders and the choices that they make. We did see, a number of years ago, when the Fed made its first move, but we did see a pretty similar reaction in markets at that time.

We did see them stabilize sometime soon after that, but on top of that, I think there is a fair bit of a global uncertainty at the moment, particularly around the trade issues, and that’s why we’re working hard and Josh Frydenberg is just landed up there in Indonesia at the moment in Bali for the meetings of the IMF and the G20.

What Josh will be doing is will be seeking to take these tensions down, not to beat them up. That’s what we’ve always done as an open trading nation. We are for seeing greater open and free trade because that’s what’s made Australia a prosperous country and where we will continue to use our excellent relationships with all of the key countries in the G20 to achieve that for the benefit of the global economy, but importantly to the regional economy and our own prosperity.

Ross Greenwood:  I was going to ask you about one thing. That is Australia does sit at a very interesting crossroad. We have a free trade agreement with United States, a free trade agreement with China. Therefore, China is very important to our economic well being, and we are important to its economic well being.

Yet clearly the trade war that’s occurring between the US and China right now means that we find ourselves almost like the meat in the sandwich with especially China now seemingly exerting its economic and even perhaps its political muscle. As prime minister, how do you deal with that? How do you deal with China now seeking to become stronger internationally and also stronger from an economic point of view?

Scott Morrison:  We trade with them. We work with them. We have a comprehensive strategic partnership with them, and we continue to pursue Australia’s national interest in that relationship, just as we do in our relationship

with the United States.

Ross Greenwood:  We’re frightened of them?

Scott Morrison:  Of course not. Why would we be?

Ross Greenwood:  Well, because China of course, wants to have more economic impact here in Australia with the foreign investments it makes with the top of and there has been even a conversations with in the last little while in regards to where national interests are trying to get into our own intelligence here in Australia. These are important national issues, Prime Minister.

Scott Morrison:  And we had national interest protections in our foreign investment rules and laws and people know the decisions I’ve taken on the number of occasions and if as long as you are clear about that and you explain the reasons which we do and we protect Australia’s national interest, always have. You don’t have to be a submissive party to have a productive relationship.

That’s not a relationship, we have a constructive partnership with China and we’ll continue to do that. We’ll be very clear about what our interests are and will always stand up for them but we don’t need to go around poking people in the eye about it. We just need to do it constructively and maturely and professionally. I think we’ve done very well out of the relationship. Trade is a two-way thing. It’s a deal. Both parties are intended to benefit from trade and when you conduct yourself in trade in that way, then I think it is beneficial for both parties.

Now, with what is happening in the trade environment at the moment, I know that there are instances where Australian companies are actually seeing opportunities with both countries and they are having to turn to Australia, if they’re not turning to, which is China or the United States, when it comes to the trade that was occurring between those countries.

But the other thing I’ve noticed with the US is this. You’ve seen the US land now agreements with Canada, you’ve seen them land them with Mexico. Everyone was saying that these were never going to happen and the US said, “I decided the position.” But they have been able to land those deals and I’m confident that as time goes on what we’re looking for here I suspect, what the US is looking for is to land a better deal for US interests.

Now, there’s nothing wrong with that. There’s nothing wrong with this strategy seeking to pursue our interests or for China to pursue theirs, as long as we do it in an open trading environment and we all do it in a way which ensures that both parties to the transaction do well, that’s what trade is. That’s how Australia has become prosperous.

Ross Greenwood:  Prime Minister’s Scott Morrison, it was good to have you in the program.

Scott Morrison:  Thanks a lot Ross and congratulations to all those small and family businesses, we’re backing you.

Ross Greenwood:  There you go. Prime Minister’s Scott Morrison here on Money News.

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