6 May 2015
Transcript - #2015047, 2015

Interview with David Speers, PM Agenda, Sky News

SUBJECTS: Interest rate cut, Budget 2015 - Small Business and Jobs Package

DAVID SPEERS:

You are watching PM Agenda.

As we have seen this afternoon, the Reserve Bank has cut interest rates to a new, record low –The official cash rate now 2%.

A week out from the Budget, the Treasurer Joe Hockey has welcomed it and urged households and small business to get out there and invest. This comes ahead of the Budget which is going to focus on small business in particular to try and encourage more investment at that level as well.

And with me now is the Small Business Minister Bruce Billson. Minister thanks for your time this afternoon.

MINISTER BILLSON:

Good to see you David.

DAVID SPEERS:

Let me ask you firstly on the interest rate cut: The Treasurer welcomes it; I suppose it is good news for small business as well?

MINISTER BILLSON:

Absolutely, and I am pleased to see the ANZ has opened the batting and already pledged to pass it on.

For people with mortgages, with small businesses, with finance facilities, even people with credit cards- this is good news. And for those who are retirees relying on bank deposits, there are other investment categories available.

DAVID SPEERS:

So go get out of their bank deposit and look somewhere else?

MINISTER BILLSON:

Well there are other options there. The stock market is producing some good returns, and who is not talking about what is happening in housing?

So there are other options there for retirees who might think ‘gee this is a bit of a set-back for our retirement incomes’.

There are other investment categories, but for those in small business, households with mortgages and people with credit cards this is great news.

I urge all banks to follow the ANZ’s lead - pass it on. Pass it on quickly. Get that cash into the economy.

And that is an important strategy….

DAVID SPEERS:

But is it also a sign of a weakness in the economy? I mean the Reserve Bank Governor says the economy is

likely to be operating with a degree of spare capacity for some time yet.

MINISTER BILLSON:

And the Governor pointed to fairly moderate growth internationally and then pointed to green shoots in our domestic economy; some improvement in consumption expenditure.

I mean there are other factors: We have 14% up on building approvals, retail sales have had a seven or eight month run of growth.

Even the amount that households are saving has come off a little bit, so there is a bit more confidence to spend ….

DAVID SPEERS:

So why do you think we need rates at this level?

MINISTER BILLSON:

Well I think we need to keep that going.

Internationally, there is barely a developed economy where rates aren’t lower than ours. In fact most of Europe, it has flat lined at zero percent or 0.05%.

DAVID SPEERS:

But they are going in the other direction. Europe is about to start increasing rates. We are cutting them. Why are we going in the wrong direction?

MINISTER BILLSON:

We just have to take those green shoots where there is momentum that the Reserve Bank Governor pointed to. And give it some encouragement.

We have also got to get business investment happening.

DAVID SPEERS:

Sure, but before we get to what we have to do- Why are we at this point? Do you agree there is a confidence problem?

MINISTER BILLSON:

Well there is an opportunity to improve confidence and that is the work we are focused on.

DAVID SPEERS:

Because it’s not strong enough?

MINISTER BILLSON:

It can be stronger.

I know that some people compare it to the near euphoric levels of confidence that were around after the

Labor Government was booted out of office.

You cannot blame people for being euphoric about that change in Government.

We have seen some of our plans blocked, that we haven’t been able to fully implement.

We haven’t been able to sustain that extremely high level of confidence. It is now about where it has been historically, but we need to kick that along.

And that is why the interest rate cuts are important and why we have the framing of the Budget to compliment that - so we have monetary policy and fiscal policy working together.

DAVID SPEERS:

I want to talk about this. If they are going to work together and the Reserve Bank Governor points to weak business investment as one of the issues behind this decision. What are you going to do for small business?

MINISTER BILLSON:

That is part of the Small Business and Jobs Package. We are encouraging enterprising people who are out there to have a go, to invest.

To consider putting on that extra person; to see reward for their enterprise –that is what the small business tax cut is about, but also encouragement to invest and innovate; to re tool up; to really get amongst it and have a go in the economy.

So the interest rate cut – helpful in terms of finance and the cost of finance.

You know we have been working on access to finance as well with alternative funding sources – crowd source equity funding, and we are looking at the Small Business and Jobs Package to add further momentum to that direction the country and the economy has to go in.

DAVID SPEERS:

So there will be a tax cut? A 1.5% tax cut for small business?

MINISTER BILLSON:

You know the Prime Minister said that and what the Prime Minister says, that is what happens.

But that is just the starting point.

There will be more. We have said there will be a tax cut that is there to incentivise enterprising people to have a go so they see a reward for their effort.

We also want to encourage investment in productivity improving purchases and activity, and also removing red tape is another bit.

DAVID SPEERS:

Alright, on the tax rate though, there has been as you would have seen a lot of concern about having two corporate tax rates. We had Kate Carnell from the Chamber of Commerce here yesterday on the program saying it’s a really bad idea to have two different tax rates. I have even spoken to one of your Cabinet colleagues today who agrees this is going to be a problem.

How do you overcome that tax avoidance problem? The disincentive to grow your business, hire more staff, if you’re going to kick into a higher tax rate, how do you tackle that?

MINISTER BILLSON:

What we are doing is what we can afford and sustain.

We want lower, simpler, taxes and it would be great to lower tax rates right across the board but we have also got to repair the Budget.

Now you know we have halved the debt trajectory we inherited from Labor and we are tackling the deficit trajectory – that work has to continue, but at the same time we need to make choices about where scarce resources are put and we have made the decision to put those resources behind jobs, behind families and behind small business to energise enterprise.

DAVID SPEERS:

Specifically on this issue about having two corporate tax rates, do you acknowledge that is going to be a problem?

MINISTER BILLSON:

No I do not because most people have got the aptitude to deal with that and some have even proposed a phased-in, graduated level so if two was a problem, four or five or six would be more of a problem so I am not sure that is quite the problem that people speak about.

DAVID SPEERS:

So it would be a phased…?

MINISTER BILLSON:

No it will have a limit, some fences around it. It is not available to big business; we have made that clear, but for more than 95 or 96 per cent of Australian businesses that are small businesses we are delivering for them because we need to energise enterprise.

DAVID SPEERS:

Just clarify this for me – if my business is worth $4.9 million…

MINISTER BILLSON:

Now you are going to draw me in on the detail! A few more sleeps and you will have all the details that are there.

DAVID SPEERS:

Okay, without giving us the specific detail, how do you overcome this issue: If my business is just under the threshold, whatever that is, why am I going to bother growing it a little bit more if that is going to tip me to a higher rate?

MINISTER BILLSON:

Because there is still reward for your enterprise, there is still reward there. What we are saying is the…

DAVID SPEERS:

But it is a disincentive in the tax system.

MINISTER BILLSON:

No, at the moment we are talking about – and let us use what has been publically announced, and that is a 1.5 per cent cut in the small business company tax cut – so let us assume we are talking about a small business company currently paying 30 cents in the dollar on their earnings. For a small business it will be 28.5 cents. So that is the difference, that is the incentive, that is the encouragement.

Would we like to go further? Of course, but we have got to be able to fund it. Now because we cannot go the whole way does not mean you do nothing; that is not the world that we are in.

We need to get on with it and energise enterprise and show reward, support and respect for the enterprising men and women that are creating the jobs and the economic opportunities in our economy.

DAVID SPEERS:

Is there also going to be a problem here in dividend imputation?

MINISTER BILLSON:

No.

DAVID SPEERS:

What are those franking credits going to be worth?

MINISTER BILLSON:

Oh well franking credits you know are linked to the company tax rate…

DAVID SPEERS:

But if that’s different…

MINISTER BILLSON:

…and we can talk more about that because you will find most small businesses do not offer franking credits but we can talk more about that.

DAVID SPEERS:

Some do.

MINISTER BILLSON:

Some do but we can talk more about that when the announcement is out there. Good try though, I like your work!

DAVID SPEERS:

It’s an important detail though.

MINISTER BILLSON:

Only a few more sleeps.

DAVID SPEERS:

If I hold shares in a company that suddenly those franking credits aren’t worth the same…

MINISTER BILLSON:

Yeah, might be, and you will have a view and that is why we are alert to all of those issues.

DAVID SPEERS:

Alright we will follow that up when we get the detail and then a lot of small businesses, 70 per cent are not incorporated?

MINISTER BILLSON:

See you do listen to what I say; I was making the point that only one in three small businesses are structured as companies.

DAVID SPEERS:

Correct.

MINISTER BILLSON:

The rest are operating as sole traders, through partnerships.

DAVID SPEERS:

So they will get what?

MINISTER BILLSON:

If I have made that point to you time and time again I can assure you I have not forgotten my own point.

DAVID SPEERS:

So what will they get?

MINISTER BILLSON:

A few more sleeps and it will be a delicious announcement and you can have me back and we will work through the details.

DAVID SPEERS:

Alright but an instant asset write off, similar to what Labor had in place?

MINISTER BILLSON:

Delicious announcements coming, encouraging enterprise, encouraging investment and innovation, that is what we are about and you will be very pleased.

DAVID SPEERS:

No shame, no red face in going back to what you got rid of a year ago?

MINISTER BILLSON:

If you are talking about some of the measures that were linked to the mining tax that did not raise any revenue to fund them, no shame in ending things that you cannot pay for.

DAVID SPEERS:

We don’t have a lot of money now!

MINISTER BILLSON:

No, but you are right, we do not have a lot of money and that is why this is such a significant and important statement about what the country needs to do and what the Government is trying to support.

We lost 519,000 jobs in small business under Labor. We saw the number of small businesses actually employing people reduce over those Labor years. That is not what we need for our future.

The over the horizon economy where we cannot rely so much on mining, needs the other non-mining sectors to step-up, to have a go, to see that they are supported by a Government that believes in them and is urging them to continue that enterprise – that is what we are about.

DAVID SPEERS:

So a few more sleeps we’ll find out before the end of the week?

MINISTER BILLSON:

It will be great, are you going to have me back?

DAVID SPEERS:

I will, before the end of the week.

MINISTER BILLSON:

It is nice to see you talking about small business, I hope it catches on. Two million Australians deserve that, they deserve that.

DAVID SPEERS:

We’ll get something by the end of the week?

MINISTER BILLSON:

You might get a little bit of information because you know I am always keen to share information with you.

DAVID SPEERS:

Small Business Minister Bruce Billson, good to talk to you!

MINISTER BILLSON:

Good to talk to you.