Well good morning. I’m here with the Treasurer to comment on the national accounts released today. They show continued, strong economic growth in our economy here, particularly compared to other developed economies and particularly compared to other economies like Canada, which are resource economies and have obviously suffered from the decline in commodity prices as Australia has. So we are seeing strong growth in jobs. We are seeing however signs that we cannot be complacent.
There is a tendency, I think, from our opponents in the Labor Party to take our strong economy for granted. They want to assume that the strong economic growth - 3% real growth - is something that will just occur without the economic plan, the leadership that we have provided and are providing. Our strong growth in exports is one that is testament to the importance of our trade export deals.
Our commitment to employment and innovation as we saw this morning at River City Labs, you saw there one business after another, that is inspired by and encouraged by our economic plan, by our plan for an innovative economy, for a growing economy that drives jobs right across the board. You saw them investing, innovating, taking risks, bringing people into employment.
That doesn't happen by accident. That requires a clear economic plan. It requires strong economic leadership. That is what we are providing, with our economic plan, the Treasurer and I and all our colleagues committed to delivering on that economic plan that will secure our future and that is what we are seeking on July the 2nd, the mandate of the Australian people to complete our economic plan to deliver on jobs and growth.
Strong signs in the national accounts today. So far, so good. But there is plenty of risk out there on the horizon. We are in an uncertain economic environment globally. Many opportunities, great opportunities but great challenges. You cannot succeed without a clear economic plan, so everything we have is encouraging companies to invest, to employ. The Labor Party on the other hand wants to take economic growth for granted, just assume that everything will hum along without any intervention from Government and at the same time, they seek to raise taxes on investment which will have the obvious consequences of less investment and fewer jobs.
So far so good. This confirms the direction we are leading the country in, in terms of our
economic plan, but there is much more work to do. We are seeking the support of Australians to complete that work on July the 2nd.
Thank you Prime Minister. Just to confirm through what is in the national accounts today, confirms the Australian economy is continuing to grow, outstripping the world's most advanced economies. Faster than the United Kingdom, the United States, the Eurozone. It is more than twice, as the Prime Minister said, the growth we are seeing in Canada, faster than Singapore and New Zealand. Now even faster than South Korea. The growth is at 1.1% for the quarter and 3.1% through the year growth.
It confirms the transition story, the transition that is occurring in our economy that the Prime Minister and I and the team have been speaking about for many, many months now. The transition in our economy is what is working. But it cannot be taken for granted. These national accounts numbers demonstrate that transition taking place. It also confirms again, what was put in the Budget in terms of where we see the economy going and that is an important outcome of today's accounts figures. It also confirms most importantly about what we need to do as the Prime Minister has just said. Rolling out the national economic plan for growth and jobs in a transitioning economy, towards a stronger new and more diversified economy as these figures demonstrate.
The key numbers underpinning the result is a 0.7% growth in household consumption and 3% through the year. While that is still below trend, this is a solid household consumption figure and it has contributed 0.4% to the overall growth we have seen at 1.1% in the quarter. Dwelling investment also remains up and contributed 0.1% to GDP in the quarter. Importantly this has been in both new dwellings and in alterations to dwellings. I think this highlights the risk of what Labor is proposing with their housing tax, their negative gearing changes and their increases in capital gains tax. Dwelling investment continues to be a positive. It is a 7% growth through the year. Now that can change and it can change with the wrong set of policies and a negative shock to the property market which Moody's referred to as being one of the great risks going forward in the economy if Labor were to proceed with those policies.
Net exports have been a strong result for the quarter. A 1.1% contribution to the quarter's growth. That has happened in two areas, which I think tells the story of the transition. You have mining, which continues through its production volumes to continue to support the strength of the economy. The investment that went into mining is now converting into production volumes which continues to support growth in our economy. So the transition not about the end of mining, in fact it is about it moving from an investment phase into a production phase and we see that occurring in the economy. The other side is on services exports. They are up 14%. Services exports in the services industry more generally is contributing some 0.4% more generally to the growth in the economy in this quarter. Productivity is also up and now it goes above trend at 1.8% and that’s a welcome development.
But there is fragility in these numbers, which our economic plan is designed to address most particularly in the area of investment. Of course forecasts acknowledged the natural change in mining investment which you see in the engineering construction figures and other figures in the national accounts today.
But equally, the non-mining investment is where we need to ensure that we drive growth in the future. That is where our entire national plan is really trying to do one thing above all else and that is drive investment. As the Prime Minister says and as he knows from experience in the corporate world, if you don't have investment, you don't have growth. If you don't have growth, you don't have jobs. So we acknowledge that the investment figures in the national accounts and particularly in non-mining investment are critical to future growth and us moving through this transition story. That is why you need to do things that boost investment, not tax investment. You can't increase investment, if you are going to increase the tax on investment which is what the Labor Party propose to do.
We also see with wages and compensation of employees the best through the year outcome since 2012. That is fundamentally a result of the strong jobs growth we have had over that period. That is a positive. We have seen modest improvement in wages. A lot of the growth we have seen in compensation of employees has come through the strong jobs growth. 300,000 last year. More than 50,000 jobs for young people over the last 18 months. That jobs dividend is producing for our national accounts. So while the numbers are welcome, we are conscious of the fragilities that exist in these numbers and our economic plan is designed to address those fragilities. The most significant of those is the need to boost earnings. Company profits as you can see through the gross operating surplus, is a negative. We need to ensure that we support businesses to earn more. Now our company tax cuts, the tax cuts for small and medium sized businesses - because that is what will occur over the next term of parliament, that is who gets the tax cuts over the next term of parliament and particularly the 100,000 businesses who employ 2.2 million Australians with a turnover between $2 million and $10 million - they get a tax cut on the 1st of July this year. They will get access to depreciation pooling provisions which enables them toi invest more. They get access to the pay as you go concessions with the tax office. They're not multinationals. You won't find a Google CEO amongst any of those businesses. What you will find is mums and dads running businesses. This is one thing I will say about small businesses; they pay their creditors first, they pay their employees second and they pay themselves third. Bill Shorten thinks they are the problem. He thinks they don't deserve support to invest more in their businesses. We do think they deserve support to invest more in their businesses. Declaring war on business and increasing taxes is not a way to drive jobs and growth when you look on the national accounts figures.
Increasing taxes on investment, Increasing taxes on small businesses, decreasing their access to important tax concessions, which I have referred to that we will make sure they get. Increasing taxes on investment through the increase in capital gains tax. Increasing taxes on the housing and dwelling industry is not a way to drive jobs and growth. $100 billion of more taxes over the next ten years is not going to address the fragilities in these numbers and it won't build on the strength of export agreements and other things that are such a key part of our economic national plan.
The other side is on services exports. They are up 14%. Services exports and the services industry is more generally contributing some 0.4% to the growth in the economy in this quarter.
Productivity is also up and now it goes above trend at 1.8% and that is a welcome development.
But there is fragility in these numbers which our economic plan is designed to address. Most particularly in the area of investment. The Budget of course forecast and acknowledged the natural change in mining investment which you see in the engineering construction figures and other figures in the national accounts today.
But equally, the non-mining investment is where we need to ensure that we drive growth in the future. That is where our entire national economic plan is really trying to do one thing above all else, and that is drive investment because as the Prime Minister says and as he knows from his own experience in the corporate world, if you don't have investment, you don't have growth and if you don't have growth, you don't have jobs.
We acknowledge that the investment figures in the national accounts and particularly in non-mining investment are critical to the future growth and us moving through this transition story. That is why you need to do things that boost investment, not tax investment. You can't increase investment if you are going to increase the tax on investment which is what the Labor Party proposed to do. We also see with wages and compensation of employees the best through the year outcome since 2012. That is fundamentally a result of the strong jobs growth we have had over that period. Now, that is a positive and we have seen modest improvement in wages but a lot of the growth we have seen in compensation of employees has come through the strong jobs growth. 300,000 last year. More than 50,000 jobs for young people over the last 18 months. That jobs dividend is producing for our national accounts.
While the numbers are welcome, we are conscious of the fragilities that exist in these numbers and our economic plan is designed to address those fragilities. The most significant of those is the need to boost earnings. Company profits as you can see through the gross operating surplus is a negative and we need to ensure that we support businesses to earn more. Our company tax cuts, the tax cuts for small and medium sized businesses - because that is what will occur over the next term of Parliament, that is who gets the tax cuts over the next term of Parliament and particularly those 100,000 businesses who employ 2.2 million Australians who have a turnover between $2 million and $10 million - they get a tax cut on 1 July this year. They will get access to the deprecation pooling provisions which enable them to be able to invest more. They get access to the pay as you go concessions with the tax office. They are not multinationals. You won't find a Google CEO amongst any of those businesses. What you will find is mum and dads running businesses and this is one thing that I will say about small businesses - they pay their creditors first, they pay their employees second and they pay themselves third. And Bill Shorten thinks they’re the problem. He thinks they don't deserve support to invest more in their businesses. We do think they deserve support to invest more in their businesses.
Declaring war on business and increasing taxes is not a way to drive jobs and growth when you look on these national accounts figures. Increasing taxes on investment. Increasing taxes on small businesses. Decreasing their access to important tax concessions, which I have referred to that we will make sure they get. Increasing taxes on investment through the increase in capital gains tax. Increasing taxes on the housing and the dwelling industry is not a way to drive jobs and growth. $100 billion of more taxes over the next ten years is not going to address the fragilities in these numbers and it won't build on the strength of export agreements and other things that are such a key part of our economic national plan.
Thank you Prime Minister.
Prime Minister, with these better than expected figures we can do away with the argument for the company tax cuts?
No, for the reasons that the Treasurer has just described, these figures absolutely underline the need for supporting investment. You have seen investment is weaker. We have not seen the growth in non-mining investment that we would like to see. Obviously mining investment has continued to decline. That is expected, that it is part of the transition Scott was talking about. But what we need is more investment. I mean, nobody, no-one with Australia's interests at heart would seriously suggest that we don't need more investment. That is what I was talking about at River City Labs this morning. It’s about investment.
If you want to have more investment, then what you need to do is make the returns on investment better and the one way government can do that is to lower tax on investments. That is why we are reducing business taxes - unincorporated businesses and companies. We are doing that, as Scott has described, over a long glide path starting with small businesses, $10 million turnovers, $25 million, $50 million turnover - then there will be a Federal election and then it goes on, 100, 250, 500. The biggest companies won't get a tax cut for eight years, will get no tax cut for eight years - there will be three elections between now and then. The beneficiaries of our tax cuts in the near term over the next six or seven years are all smaller companies, and particularly over the next three years, they are overwhelmingly Australian-owned family business. Now what we are doing is we are giving them the incentive to invest. And you heard from one of the entrepreneurs this morning, talking about how important these business tax cuts are to his business encouraging him to invest and hiring the people that he and his partners have put on board.
We need more investment because more investment drives more jobs. Let's not kid ourselves. Bill Shorten has declared war on business and the first casualty of his war is jobs. That is the price you pay when you take on - if you attack the creators of jobs, the consequence is you get less jobs.
Yesterday we heard the Finance Minister speaking about strong economic headwinds. The numbers appear to defy that. Given these numbers are now outstripping wages growth and given you have mentioned the tax cut, the Treasurer mentioned all these benefits to small and medium businesses, why then should they argue that they can't afford to pay employees on Saturdays and Sundays a bit extra?
You are raising an issue of penalty rates. That is a matter for Fair Work. Employers are entitled to make - employers and employees will make their own arguments. But that is a matter for Fair Work. It is a matter for the independent tribunal.
Everyone knows where Scott and I stand and our Government stands on penalty rates. It is a matter for Fair Work, the independent tribunal and we will respect its decisions.
Labor walks both sides of the street. Let's not kid ourselves here. As on so many other issues Mr Shorten tries to be all things to all men and women. On the one hand he wants to wage a campaign and accuse us of wanting to reduce penalty rates. It is no part of our policy - it is a matter for Fair Work. On the other hand when he is talking to business audiences, he says: "Oh, I am on a unity ticket with Malcolm, we will support Fair Work". Then he tries to suggest that if Fair Work were to reduce penalty rates or change them he would do something about it without saying what. I mean the truth is we have no idea where he stands on these issues as on so many other things.
You know exactly where we stand, there is a tribunal - they are conducting a review into penalty rates in some industries, not all, in retail and hospitality and they will come to a conclusion and we will respect it.
Can I make another point on the conditions and the numbers? Because you make an assumption in the numbers which is incorrect and that is the global headwinds do remain strong. The fact we have been able to achieve these results as an economy - and that is everybody - that is employees, its businesses, its investors - its everybody working together to get these numbers. They don't happen by accident, they happen through the investment and the hard work of Australians right around the country. Those global headwinds do remain very very strong and that just reinforces again why you need to stick to the national plan that is going to underpin incentives for investment in our economy and that is what our plan does.
These numbers show fragility in business investment. They show fragility in company profits. Those are the two things you have to address in a national economic plan. Now, Bill Shorten has no plan to address those issues. He plans to tax profits more and he plans to tax investment more. Well, you know what the result will be.
Prime Minister, you spoke about a mandate in your opening remarks. Bill Shorten and the ACTU have said, have indicated they won't support your mandate in the new Parliament on company tax cuts and the restoration of the ABCC. So, what is your message to voters on the need for a clear mandate? Assuming you want a less feral Senate in the new Parliament, even with a majority in the Senate.
Can I just say to you, we are asking the Australian people to support us on 2 July to deliver our national economic plan. It is already delivering growth and jobs but there is much more work to do. And we're seeking that support on 2 July and when, if we are re-elected on 2 July, we will then get down to completing our national economic plan because every element of it will deliver stronger economic growth and more jobs.
Our opponents in the Labor Party and the Greens - everything they propose is going to reduce investment. And that is an objective fact. If you want less of something you increase the tax on it. They are increasing taxes on investment right across the board. They're increasing income tax, they're refusing to cut company taxes even for businesses with turnovers of less than $10 million a year. They're waging a war against business. A war against the business men and women of Australia whether they are family businesses in traditional industries or whether they are the young entrepreneurs I was with today. They're waging war on business and the casualty of that war is jobs.
On your company tax cut, you've been campaigning a lot on jobs and growth, particularly jobs. Treasury modelling suggests that the employment growth benefit over the long term is only in the order of 0.1 to 0.4 per cent. Can you plausibly claim to be stimulating economy growth with a company tax cut?
There is a reason why business taxes have been cut in Australia. They used to be 49 per cent not so long ago. They were cut by the Labor Party you might recall and then by Peter Costello. The reason we cut business taxes is because you improve the return on investment and, as Treasury has set out and Scott can speak further about this, but as Treasury set out last year, for every dollar you reduce company tax you add $4 of value to the economy, most of which goes to labour, goes to employees in other words.
In this tough economy you take every inch of growth you can get. You take every job you can get. As a Government we're not going to be dismissive of the ability to increase investment and the jobs and the growth that comes from that. I get the sense from Bill Shorten that somehow there's some growth he is not happy to have. Every inch of growth matters as small or as large as it can be. We will fight for every inch of growth, every job that can be created as a result of our tax plan and our broader national economic plan. And that is just like the businesses, those businesses between 2 and 10 million, those mum and dad businesses. They fight for every dollar they make, every profit they can, every person they can put on and we will not be like Bill Shorten and just dismiss that as some inconsequential outcome. Our policies are designed to grow jobs and to grow investment. Bill Shorten's policies are designed with the Greens to detract from that.
Can I just ask on your superannuation reforms? Did you take those to either a Liberal or the Coalition party room and if not will you and are you now facing pressure from within the party on this?
The Budget which comprises obviously the superannuation changes has been presented by the Treasurer and has the full support naturally of the Government, the Cabinet and the party room.
Goldman Sachs apparently has done calculations on the ten year picture from your tax plan and says that 60 per cent of the benefit of the tax cut will accrue to foreign investors. Do you believe that number is right or at least in the ball park? And, if it is, can Australians be still satisfied that this is good value for their dollar?
I haven't read the report Tim so I can't comment on it but one of the benefits of reducing company tax, and you have got to bear in mind that the bigger companies don't get any tax cut under our plan until eight years out, eight years and three elections from where we are today. The important point is that if you deliver a better return on investment then you get more investment.
See Labor overlooks the fact is that we are in a very competitive global environment. And where it's competitive for capital, it's competitive for opportunities. We are an open, trade economy and so that is why we have to be innovative. That’s why we have to be competitive and more productive. You saw that spirit of innovation an how important it is driving exports this morning at River City Labs.
Can I make this point to you? Look at what other countries are doing. I mean Mr Shorten may think he's an economic wizard. But why has the United Kingdom reduced its company tax down to 20 per cent heading to 18? Why are other jurisdictions around the world reducing company tax? Do you know that when Peter Costello reduced our company tax in 2001, if I recall, to 30 per cent, it was - it became one of the lowest in the OECD. It wasn't the lowest but it was down the bottom end. Now we are one of the highest. So what has happened is that all these other economies, all of these other markets around the world have recognised the need to compete. That is why they've reduced business taxes and they have seen the benefits of it. I think sometimes the Labor Party imagine that Australia is in some kind of bubble. Sealed off from reality, sealed off from the rest of the world where you can increase taxes on investment and investment won't be affected. Where you can deny companies tax cuts and investment won't be affected. Where you can increase capital gains tax and investment won't be affected. Where you can ban negative gearing and housing values and rents won't be affected. They're kidding themselves. Every single policy they have proposed is going to have the result of reducing investment, reducing economic activity and reducing jobs. It is the most anti-business agenda of any Labor leader in a generation.
Can I add to that? The people who will benefit from our tax plan on 1 July of this year is 2.2 million Australians working in 100,000 businesses that have a turnover between $2 million and $10 million. They are not global CEOs. They are not foreign companies. They are Australian companies who will reinvest those earnings in their businesses. You know what that means for that employee in that business when they see them buy that extra piece of equipment? Or they see them invest in their business? It means that they know that their job is secure. Now Bill Shorten is saying to those 2.2 million Australians who work in those businesses that your job is not important. You can go and keep working for a business that should pay a higher rate of tax and we're going to penalise that business that employs you by making you pay a higher rate of tax. So do you want know who will benefit from those tax cuts? It will be the people who work in the businesses that are small business, family businesses who mortgage their houses so that people who work for them can have jobs. We think they deserve support. And we're backing them.
Do you acknowledge that your changes to super particularly for the transition to retirement scheme will not only affect the well-off Australians but those earning less than $100,000 dollars a year? And is it time to start explaining these changes more simply if some of your Cabinet Ministers even seem confused?
The change will affect 115,000 to the transition to retirement income stream. That is based on the Productivity Commission analysis which says just 5% of superannuants aged between 55 and 64 have these schemes. Now the way the scheme works is this - one of the things we're trying to do deal with in terms of the integrity issue is people will take a wage after they are in that position where they can have one of these schemes and they will make a contribution into their superannuation fund and then they pull income back at a concessional tax contribution into that superannuation fund, and then they pull income out of that superannuation fund which is not taxed. And as a result it is a scheme that minimises the tax paid and so this is an important integrity issue that needs to be addressed.
We are not abolishing the transition to retirement income stream system, it is important for those who are moving through that process and scaling down their work. The Productivity Commission also found the overwhelming majority of people who are engaged in these schemes are working full-time. So it's 115,000, the figures that we have said are absolutely right, and that is only 96% of people are either better off or no change to their situation as a result of the changes we have put in place. Now it's important that we make sure that our superannuation system is sustainable. And the changes we have made ensure that it's there for people in the future, not just those who have had the benefit of what have been very generous arrangements over the last 10 years or so. So they're important changes. They're integrity changes.
I notice that last week the Labor Party supported these changes. Prior to that, they opposed them, and yesterday afternoon they still can't make up their mind. Now, if they want to add another $640 million back into the black hole, they can do that if they like. But the question about the black hole is not if it exists, it’s just how big it is. This is just another question - do they support it today or don't they support, it or should we check with David Feeney?
..Some people who access the transition to retirement scheme earn less than $100,000 a year.
Remember what the scheme is for - if someone has a low balance or a low income you would have to ask the question why someone would be advising them to draw down on a low balance superannuation account when that’s the superannuation account they're going to be relying on in their retirement. And one of the reasons we're changing this scheme is to ensure that the TRISS measures are only used by those in a position where it is suitable for their circumstances.
Now, where it's being used for the tax minimisation purposes, where someone working alongside another person is accessing this scheme and as a result paying a lower rate of tax to the same person working alongside them, well that’s is not a very fair result. I’d call that a problem with the system that needs to be fixed. They're paying 15% on their contributions on the way in and then recycling the money back out the other side of the superannuation fund where they're paying no tax on the earnings.
So what it does is it lowers their tax rate. So where there are things like this in the system, they need to be fixed, and we have fixed them and remember what we're spending this money on - we're spending it on the low income superannuation tax offset, the people on low incomes, under $37,000. So they don't pay tax on their contributions going into their super. We're spending it on those aged between 65 and 75 who now for the first time can continue to contribute to their superannuation up to the age of 75.
850,000 private contractors who previously couldn't deduct their superannuation contributions because of the rules that were previously there, those who are wage earners and private contractors. 850,000 of them are now better off as a result of the fair changes we've introduced to superannuation. It's a fair measure. It impacts on 115,000 is our estimate. The numbers of over 500,000 that are out there relate to superannuation accounts and people have multiple accounts. I think that deals with the issue.
I might just say the Productivity Commission considered this very carefully in their report last year. And the figures that the Treasurer has quoted are all from the Productivity Commission report and the change amounts to the earnings in the fund that is used for the transition to retirement being taxed at 15% rather than being tax free. So it is a - yes it is an increase in taxation but it is still a very concessional rate of tax, and it is very important. So super and transition to retirement still remains very concession but what we are doing is making the system fairer and that enables as the Treasurer has said, enabled us to support independent contractors who have been unable to contribute to super in the way others have, and been able to support people out of the work force for years to catch up, that is mostly women. It enables us to ensure that people earning under $37,000 a year are not paying tax on their super. It enables us to ensure that older Australians between 65 and 75 are able to continue contributing to super on a concessional basis. Because they're continuing to work.
So these are all very important reforms to make a great superannuation system better, to make it fairer. To make it more flexible, to make it better for women, to make it better for people on lower income, to make it better for older Australians and for people who are self- employed. So we're proud of these changes. They're important. They're overdue. Many of them have been called on - governments have been called on to to do them for many years. They've been kicked into the long grass for a long time and we've taken them out, we're a reforming government. We're determined to make the super system fair and work for all Australians and do its job of ensuring that Australians can live more comfortably in their retirement, and either be independent of or supplement the age pension.
So thank you all very much. Sorry, yes? One question.
There are leadership rumbles in WA. What would the impact be on your campaign if Colin Barnett was rolled before the election?
Well, can I - Colin Barnett is a great Western Australian Premier. He is a great leader of Western Australia. But I'm not going to - political commentary is your area. In years past I used to write about politics. Not anymore. It’s over to you guys. So thank you very much indeed.