E&OE TRANSCRIPT
TV INTERVIEW
SKY NEWS AM AGENDA
THURSDAY, 15 DECEMBER 2016

SUBJECT/S: US interest rate rise; Mid-year Budget Update; Regional Australia; Government’s $50 billion big business tax cut; Government risking AAA credit rating; Labor’s Budget repair measures

KIERAN GILBERT: Let's go now to Labor frontbencher, Shadow Finance Minister Jim Chalmers. I want to ask you about, well a few things today, Jim. We've seen the decision by the Fed Reserve, they've suggested that there'd be more rate rises next year. Our dollar's fallen a cent as a result. What's your reaction to this in the context of our economic outlook? We've got the Budget update this coming Monday; the AAA rating very on the line here, Jim?

JIM CHALMERS, SHADOW MINISTER FOR FINANCE: There’s a lot going on in the economy, Kieran. I think that decision in the US by the Federal Reserve does have the capacity to be quite good news for Australians and particularly for Australian exporters, because when the dollar comes down, our exports do become more competitive. I thought what was really interesting out of the Federal Reserve, was they said one of the reasons for pushing interest rates up in the US was because of the strengthening economy and particularly the strengthening labour market and their the contrast between what's happening in the US and what's happening in Australia couldn't be clearer. We do have some serious employment challenges in this country. No matter what the labour market data says later today, we've had full-time jobs disappearing to this point; about 90,000 this year alone have disappeared. We've got the highest underemployment on record. So we've got our share of challenges here. We have a Government that was elected on a platform of jobs and growth and repairing the Budget but instead we've got a shrinking economy, a growing deficit and full-time jobs disappearing.

GILBERT: Now we've seen the Treasurer this week indicate that he wants to focus on the regions, those disadvantaged, dislocated from the better off areas of our economy. You're not buying that obviously – 

CHALMERS: (laughs) No.

GILBERT: You're against the enterprise tax cuts plan. But how about a bit of compromise in the new year if Labor says "OK, we'll agree with tax cuts for companies of up to $50 million or $100 million per annum" and then the Government gets to make savings, and also some tax competitiveness?

CHALMERS: Firstly, that whole pitch about the regions, of course we want to see inclusive growth in this economy and we want to make sure that the regions are tapped into that. But that farcical announcement, or half-announcement, by the Treasurer yesterday to try and pretend that he's the battlers' friend at the same time as he gives four big banks a $7 billion tax cut. I mean, it's just laughable. It's one of the reasons why Scott Morrison's not taken especially seriously anymore. But on the more fundamental issue of that company tax cut, the solution to the AAA crisis in the Government's mid-year update is staring them in the face. They can improve the Budget bottom line by more than $80 billion over the medium term if they ditch that company tax cut and they pick up our negative gearing and capital gains policies. That will lock in the AAA credit rating for Australia. And the test for Scott Morrison on Monday, as he releases that mid-year update, is whether or not he cares more about lining up excuses than locking in the AAA; whether he cares more about pointing the finger in a political fashion or making good decisions for the future of the Budget and the future of the economy; and whether he cares more about a $50 billion handout to the top end of town than he cares about the higher mortgage repayments that would result if Australia loses the AAA credit rating.

GILBERT: But the Government points out that your position on the tax cuts means that our corporate rate remains uncompetitive. What's your response to that, particularly when your threshold is $2 million a year and many medium-sized businesses would miss out on any such tax cut?

CHALMERS: Our opposition to the $50 billion tax cut for big business is not an ideological one, it's a fiscal one. At a time when the AAA credit rating is at risk, we can't afford to give $50 billion to big business. That's why we oppose that plan. We're not saying that in a perfect world, businesses wouldn't want their taxes to be lower. We are saying that businesses factor in a whole range of things when they make their investment decisions and tax is one of them, but it's not the only one. The quality of our infrastructure, the quality of our human capital; all of those things factor in as well. But at a time when the Budget has blown out so substantially under first Joe Hockey then Scott Morrison – we've seen the deficit for this year triple; the deficit for last year increase by eight times what they inherited; we've got net debt blowing out by more than $100 billion – now is not the time to proceed with this unaffordable tax cut, which is risking Australia's AAA credit rating and has the capacity to push up mortgage repayments for middle Australia.

GILBERT: Do you think that Labor needs to rethink its blanket opposition to the welfare cuts and education cuts, which are still not countenancing as we face this threat to the AAA rating. It's upwards of $14 billion. If Labor's talking about the Government needing to compromise, why are you showing no willingness to compromise in those areas?

CHALMERS: I don't think it's a fair characterisation of our position to say that we haven't been prepared to compromise. We have signed up to a number of Government savings measures, including recently in the so-called Omnibus Savings Bill. We have been very constructive.  The approach we take to this, Kieran, is to agree where we can and to disagree where we must. We won't sign up to asking the most vulnerable people in our community to carry the can for improving the Budget. We won't smash Medicare, we won't hollow out the future of our schools with that $30 billion cut to schools funding. So what we've done instead, Kieran, and I think it's the most constructive thing we can do in this Budget context is to say to the Government: "We think there is a fairer way to repair the Budget." That begins with not proceeding with that $50 billion tax cut for big business, but also negative gearing changes, capital gains changes – more than $80 billion in improvements in just those decisions alone. If we proceeded with that and agreed with that, we would lock in the AAA credit rating. Because at the end of the day, Kieran, the Government can keep its big business tax cut or Australia can keep its AAA credit rating, but can't keep both.

GILBERT: We've only got about 30 seconds left, but what would be your message then to the ratings agencies? Do you think that they will hold off to the May Budget to give the Government some more time?

CHALMERS: That's a matter for the ratings agencies. They have certainly sounded the alarm bells over and over and over again and Scott Morrison has shown no willingness to listen to those warnings. If he took those warnings seriously and if he truly cared about mortgage repayments and confidence in our economy, which is plummeting because of the Government's economic mismanagement; if he cared about that; if he put those things above the blame shifting and the political games that he plays, then he would improve the Budget by more than $80 billion, lock in the AAA credit rating and end the uncertainty over the rating.

GILBERT: Jim Chalmers, we're out of time. Appreciate it this morning; we'll talk to you soon. That's all for AM Agenda.

ENDS