PM: Thank you very much. I'm joined this morning by the Deputy Prime Minister and Treasurer, by the Minister for Resources, Energy and Tourism and the by Assistant Treasurer.
As a Labor Government, when the global financial crisis hit we were determined to protect Australian jobs. We acted to protect Australian jobs and to keep Australians working. Now, during this phase of our economy's growth, we are determined to share the benefits of the resources boom.
Australians are well aware that there is a resources boom underway, with resources prices high; with some of our biggest miners making record profits; with hundreds of billions of dollars of investment in the pipeline, but many Australians have thought to themselves ‘well what does this mean for me?' These are the assets in our grounds that can only be dug up once, they can only be dug up and sold once.
Many Australians have thought ‘what does this mean for me?' as these assets are dug up and sold, ‘what does it mean for my future and for the nation's future?'
Well, they're very legitimate questions, and last night in this Parliament those questions were answered when the Government delivered its Minerals Resource Rent Tax.
What this means is a fairer share for Australians right around the nation. What this means is that our super profitable mining companies will pay more tax, and that tax will be used to cut company taxes, to give Australians more superannuation, and to build more infrastructure.
This is about a fair deal across the nation for Australians from the benefits of the mining boom. It's about ensuring Australians today see that fairness.
But it's also about ensuring Australians in the future see that fairness, too. Australians recognise that this is a deep and will be a long-lasting boom, but they still want to know what the Australian economy will look like in the days beyond the resources boom, and I want to make sure our nation emerges from this resources boom with a diversified economy that can offer opportunity to all.
That's why we are having our super profitable miners pay more tax: in order to cut company tax and provide benefits to small businesses to share opportunity around the country as we grow our pool of national savings and give Australians better retirement incomes.
This is about sharing the benefits of the boom in the interests of working Australians.
I'll turn now to the Treasurer for some remarks and then we'll take some questions.
TREASURER: Thanks very much Prime Minister.
Look, this is a very big win for the Australian people. It's a very big win for 2.7 million small businesses. A very significant tax cut for those small businesses. A $6500 instant asset write-off will really help with the cash flow of small businesses, particularly those that aren't in the fast lane of the mining boom and it's a very big win for the Australian workforce. A very big win for 8 million workers, a significant boost to their superannuation over time and a significant boost to the superannuation of some low-paid workers as well. And what all that does is boost our national savings, and in boosting our national savings we build the nation.
We provide a critical platform to fund Australian industry. Boosting our superannuation savings was demonstrated as being very important as helping our country during the global financial crisis when those savings were deployed to fund Australian industry quite significantly.
So this is a critical economic reform in our 25 year economic reform journey. A very significant reform that owes a great deal to the determination and guts about our Prime Minister, because this has been hard fought and we have fought against vested interests that have captured the Liberal Party in this debate but we've got it through because this is part and parcel of facing up to the challenges of Mining Boom Mark II and maximising the opportunities that flow from that to the whole country.
PM: Happy to take some questions. Yes?
JOURNALIST: Isn't it a fact that the mining tax is a risky proposition because a drop in commodity prices could wipe out the revenue that's raised from the measure?
PM: Well I'll turn to the Treasurer for some comments, but this is an efficient tax. It's a tax on profits, as opposed to the inefficient taxation that we see through royalties, and what that means is that during this resources boom our most highly profitable companies will pay more tax, and that will be used to share the benefits of the boom to all Australians.
And because it is a profits-based tax it doesn't discourage investment in new mining activity. It is an efficient tax structure.
I'll turn to the Treasurer for some comments, too.
TREASURER: The whole point of a profits-based tax and why it was recommended by the Tax Review is that when prices are really high we get a fair share of that gain. That is the whole point of having a resource rent tax.
That is why it was recommended by the Tax Review. And what we know - and we said this 18 months ago - is that Australia's prices will be higher as we go forward. Our terms of trade are around 140-year highs. Now we don't expect that to last forever and of course there will be swings and roundabouts but what we know, given demand in the Asian region and given the Asian century, is that by putting in place a profits-based tax now, we will maximise the opportunities for Australians to get a fair share from our mineral wealth, which is going to be worth a lot more as we go forward.
That is why this is such a critical economic reform because in the past our royalties system has not captured fair value of our resources and indeed it has punished so many of those businesses that aren't profitable. So when businesses are not profitable they are not impacted as much. So when prices go up, so does the return to the Australian taxpayer and of course when prices come down, well the returns come down as well. That's the whole point of having a profits-based tax.
PM: OK, OK - Andrew?
JOURNALIST: Maybe you could answer the question as well, Prime Minister - one of the arguments put by the smaller companies, smaller miners, is that it discriminates against them. If it is proved that they are discriminated against, or disadvantaged, do you pledge to change that legislation?
And secondly, I just want to ask Mr Swan about the penalties - if Colin Barnett, for example, lifts royalties, then he knows that the lag with the Commonwealth Grants Commission is such that it might be another government, or another leader, who actually pays for the reduction in GST revenue, or GST share. Would one of the mechanisms you're considering make the punishment more immediate by bringing it forward?
PM: Can I just say something and then go to Wayne on the question of the intersection with the States.
I am truly amazed that any State premier would be saying no to increased superannuation; no to company tax cuts; no to tax breaks for small businesses in their State - truly amazed any State premier would be doing that.
And in relation to Premier Barnett, he knows better than most that he has agitated to see a review of the Goods and Services Tax and that I have instigated such a review, because I do believe it's important that we look to make sure that states are conducting themselves in the most economically efficient way, and that is part of the GST review being overseen by former premiers Brumby and Greiner. They are therefore the right people to ask to look at this question - royalties being an inefficient State tax.
TREASURER: Well the Prime Minister has largely answered the question. The fact is he does get a temporary boost but he loses it all and by putting up his royalties he is in fact giving money to other states. So he's not doing the right thing by the people of Western Australia in the long-term.
Now, because of the way the formula works, the Prime Minister agreed with the Premiers that we would have a review of the principles that underpin the distribution of the GST, but it's a wider question than just the GST. It's a question of Commonwealth funding that also comes from a variety of other areas.
So the point is that he hasn't won from doing what he is doing and what we do need to do is to sort out some of these issues and one of the ways we're sorting them out is through that review but I thought Martin might want to say something about the small miner question.
MINISTER FERGUSON: Look, the tax is specifically structured to actually in essence effectively mean small miners pay very little tax.
Take the magnetite industry, for example, and have a look at the taxing point. That's the key to this tax system.
In terms of the magnetite industry, at that taxing point the dirt is worth very, very little. The real value of the magnetite industry is the processing past the taxing point. We made a further concession lifting it from $50 million to $75 million, phased out at $125 million.
Can I also remind you this is a prospective tax. The real problem for small mining companies in Western Australia is the royalties system. Irrespective of profits, they'll be taxed on the amount of commodity they actually produce from day one: no write-off for investment in capital equipment or whatever, they are taxed from day one, and the real challenge of the magnetite industry in Western Australia is the increase in the royalties.
There's already a bit of whisper in Western Australia, the Western Australian Government is now going to have to give a holiday with respect to royalty payments to the magnetite industry to try and continue to make Western Australia attractive for investment in the magnetite industry compared to other States and Territories. That is what came out of the Argus-Ferguson process.
PM: Thank you, we'll just go one at a time. We'll go Matthew Franklin - yes?
JOURNALIST: Prime Minister, on superannuation, I think the Treasurer said, correct me if I'm wrong, that this mining tax will help everybody's superannuation. Can I just get this straight? I might be wrong, but I thought that all you are doing with the proceeds of this tax is to augment the superannuation of low-income earners. Can you please explain how the increase from 9 to 12 per cent is funded by this because - unless I'm wrong, please explain to me the - I thought that that's to be met completely by employers and do you expect them to take that off their bottom line?
PM: OK, we'll go to Bill Shorten but can I give you the bad news? You are wrong.
Moving superannuation in the way that we have determined to do, from 9 to 12, has a tax consequence for the Federal Government because of the difference in tax treatment, so that has to be provided for, and then of course we have built into this superannuation benefits for low-income Australians because that is the right thing to do by low-income working Australians, so that they too can have some prospect of a decent retirement. I'll turn to the relevant minister.
JOURNALIST: (inaudible)
TREASURER: You're a beneficiary, too.
MINISTER SHORTEN: Well done, Matthew.
PM: Yep, that's right. Well, we don't know about your own personal tax arrangements, but for the movement from 9 to 12 in relation to all working people there are tax consequences that need to be dealt with in the Commonwealth budget.
MINISTER SHORTEN: There are three groups of beneficiaries for what happened last night. First of all, there's the people over 70; now they go to work and are employees, that's the first group. There's about 53,000 of those Australians who are working over 70. Up til last night, if they were over 70 and working they couldn't get superannuation. Now they can, from 1 July 2013. That has a cost.
The second group of beneficiaries, the group you identified initially in your question, there's 3.6 million Australians who earn less than $37,000 a year, and then the third group of beneficiaries is, figures based a couple of years ago, there's 8.5 million Australians who are getting 9 per cent super and that's it. So they're the three groups.
The tax cost to the Government is this: when you get paid, and I'll go through each group very quickly, and I'll go through that last group because that's the big number Matthew and that's the higher paid people, when you're earning above a certain amount of money your marginal tax rate is higher than 15 per cent. It can be, depending on what it is, 30, 45 per cent.
What happens is if some of your income, instead of being received in your fortnightly pay or your monthly pay taxed at the higher marginal rate, what happens is all of a sudden under what we've proposed over the next seven years, 3 per cent of income which was previously taxed at a higher rate will be taxed at the concessional rate of superannuation, which is 15 per cent. You know the deal with superannuation is if it's compulsory it's concession - if you can't have it now you get a concessional tax rate, and that's part of the deal.
So, what we're doing is we're seeing an amount of income in the forward estimates and beyond that which will move from the higher taxed pool to a concessionally taxed pool.
JOURNALIST: (inaudible) employer's contribution.
MINISTER SHORTEN: You're right in part, but understand that if all of a sudden the Commonwealth is receiving less income revenue, in other words if the pool of money that was going into the higher taxed pool is in a lower taxed category, then there's money which is no longer available for the Commonwealth, so it's the funding of the tax concession rate which has to be replaced and that's where some of the money's going.
What is interesting, I should say, is that our opponents have said - I mean, they've flip flopped all over the place - but what they have said is that they will keep the increase but they haven't explained how they fund the tax concession for it.
But what is significant is the Opposition hasn't said what they're going to do on that second group of people I mentioned. There's 3.6 million Aussies who earn less than $37,000 a year, what this Government's done is its finally dealt with an inequity in the system that's lasted ever since super was invented, it's this: when you earn less than $37,000 a year, you either pay 0 income tax or 15 per cent, and what's happened is we've been forcing people up to now to save into super and they've got to pay 0 per cent tax, so they're actually paying more when they go into their super that if they were getting in their pocket, or at least just the same. We're abolishing that. Now, that's $1.8 billion over the forwards.
The question is 1) do the Opposition, are they going to rescind the special deal for 3.6 million Australians who will no longer have to pay tax, and that for an Australian who earns $37,000, that's an extra $500 which they were paying in tax, they'll get to put into their superannuation. So they haven't explained a) will they rescind it, and if they decide, like the bigger super increase they're not going to rescind it, they' haven't explained how they'll fund it.
The other group is the people over 70, there's not a large number at this point but that has a small cost for the reasons I've explained.
PM: OK, we'll go to Mark Riley. We'll take them one at a time and we'll go to Mark Riley first.
JOURNALIST: Thanks, Prime Minister. The Opposition says you've done a secret deal with the Greens here. Where's the $20 million coming from and why weren't they or you prepared to release that information last night?
PM: Well, the Government has determined to put in place a modest savings measure that was in contemplation in the context of MYEFO. The details of it have been released by the relevant Minister - that is, the Assistant Treasurer.
Yes, Phil Coorey?
JOURNALIST: Back to royalties, the cut off you've put in with the letter with the independents is July 1 this year, but West Australia raised its royalties before July 1. Now, they say it's $2 billion based on a low dollar, Treasurer says it's about half that. Either way there's an impost there. Are you going to have to reimburse them, Western Australia, for that entire royalty increase, the miners sorry?
TREASURER:We will deal with all of these issues in two ways. One, we'll deal with the long-term issue about royalties and the relationship to the relativities in terms of GST distribution and other Commonwealth payments. But secondly, we have to deal with the here and now, and in terms of the states, we had to put a date in so we put it in 1July.
There has been a debate about who knew what, when, where and why. We've decided to put a ruler under that, if you like, and make it 1 July because there will be consequences for those that continue to put up royalties in this environment. As Martin has said, it will have a dramatic impact on many companies, an adverse impact, but also we've said we can't necessarily continue to make the contributions that we need to make in terms of infrastructure. That's the date we've set.
JOURNALIST: So is the WA royalty increase, does that beat the deadline?
TREASURER: I said 1 July.
PM: We'll go to Michelle, and then we'll come across. Michelle?
JOURNALIST: Mr Shorten, can you just clarify, you were talking about the lost revenue with the 15 per cent concessional rate, can you clarify how much that would cost over the forward estimates?
TREASURER: I've got a figure in my head Michelle but I think we'll get it to you afterwards just in case. It's-
JOURNALIST: -Could you get it out of your head, perhaps?
TREASURER: We'll you know, it's only had three hours sleep Michelle, so-
PM: -We did have quite a late night. Yes, we'll go to Mark.
TREASURER: It's a substantial abount of money anyway, Michelle, I can tell you that, over the forward estimates.
JOURNALIST: Prime Minister, why did you ask the Greens not to divulge the details? Doesn't that just give Tony Abbott a stick to whack you with about secret midnight deals, and secondly, you set this year up to be the year of decision and delivery, we're at the end of the parliamentary part of it - how do you think you've gone?
PM: Well, on the savings measure that we had in contemplation and we have decided to action, it's a 1-year pause in the phase down of withholding tax, and the Assistant Treasurer has released the details.
We wanted to release those details today because, just in accordance with normal prudent Government measures and approaches, we wanted to alert stakeholders to the fact that we were actioning that savings measure, so we've been through that process this morning and when we completed that process the Assistant Treasurer released the details.
On year of decision and delivery, I have been determined every day of this year to make sure that we deliver to working Australians in this time of change in our nation. This is the Asian Century. Our economy is being transformed. There's nothing more important to us as that transformation happens than making sure Australians have the jobs and opportunities of the future and that they have them with fairness. That's what the big reforms like seizing a clean energy future and this one have been all about.
Yes, we'll go to the very quiet Chris Uhlmann just because he is very quiet. Yes?
JOURNALIST: Yes, look, I just wanted to get some more clarity on what Matthew said. You've talked about how the mining tax pays for the tax issues that the Government has, but who pays for the move from 9 to 12 per cent? That 3 percent is paid for by employers, isn't it, or by employees forgoing wages and saving them?
PM: I'll turn to the Assistant Treasurer, but can we just take a little step back? There's an implication in this question somehow that this would have happened in any event. There are working Australians who never would have seen a cent of an increase in super over 9 per cent if this Government hadn't decided to make it happen for them, and we decided to make it happen for two reasons.
I believe Australians are entitled to a decent retirement, and they're not going to get that decent retirement of a 9 per cent superannuation contribution. So, it's about fairness to working Australians and we've put in additional measures to recognise that low-income Australians do it the hardest getting to a decent retirement, and also to recognise in the world we live in now there will be changing patterns of work and retirement, and so that's the measure in relation to people over 70.
So, Labor, the Party of superannuation, fought every step of the way, opposed by the Liberals when we first put it in place in this country, opposed now about decency for working Australians. It's also about having a pool of national savings for our national economy. We saw the benefits of that during the days of the global financial crisis. We'll see the benefits of that as our economy transforms and we seize this economy of the future.
I'll go to the Assistant Treasurer.
MINISTER SHORTEN: When the conservatives say that increasing superannuation from 9 to 12 over the next seven years is a cost on employers, they're lying. It's a matter of record. If you look at the increases when we increase superannuation in this nation from 3 percent to 9 per cent - that was between 1992 and 2002 - we saw what happened then: business profits as a share of GDP went up, unemployment fell, real wage growth still occurred, we saw a decrease in the unit labour costs and productivity increased.
Increasing superannuation is not a cost in terms of employers because what happens is it's offset against real wage increases. So, the fact of the matter is, over time, and these are seven instalments, it's a modest plan, quarter of a percent until 2013, quarter of a percent in 2014, then five lots of half a percent, so on a $100,000 payroll it's $250 extra.
The truth of the matter is for workers what it means is if they were getting that all in cash, that would have a great inflationary impact, so what it is is for employers, it's part of the inevitable real wage increases they'd have given and we've got all the evidence of a decade to show it, and for employees it's an anti-inflationary tool because money which is diverted into savings as opposed to immediate consumption, exerts a downward pressure on inflation.
JOURNALIST: (Inaudible)
MINISTER SHORTEN: Pardon?
JOURNALIST: The money doesn't come from the mining tax, it comes the employers (inaudible).
PM: (Inaudible) for tax arrangements have been made from this tax, so there's a values question here and we've answered it. Do you think that money best lies in the hands of the most super-profitable mining companies in this country, or it's better off going to support a measure to give Australians a decent retirement? Well, we've answered that question and the answer is in favour of Australians and a decent retirement.
I well and truly understand Tony Abbott's answer is let super-profitable miners keep it.
David Speers?
JOURNALIST: Prime Minister, given the spending that's associated with the mining tax and the extra concessions you've had to make, can you guarantee that the mining tax as a whole won't cost the budget?
PM: We'll go to the Treasurer.
TREASURER:Well, what I can certainly guarantee is that we will continue to put in place fiscal discipline. If you look at what we receive from the tax and if you look at what we're committed to, it is broadly equivalent through to 2013-14. We're doing the budget update through the mid-term review towards the end of the year. We will account for all of that then.
JOURNALISTS: (Inaudible)
PM: We'll go here, yes.
JOURNALIST: Treasurer, when you announced the interest rate withholding tax reduction in last year's budget, you said at the time that it would put downward pressure on interest rate margins. By deferring it, aren't you putting upward pressure on interest margins?
TREASURER:Well, this is a benefit that we've deferred for one year. It's a very important reform but we can not necessarily accommodate it at this time. We are still committed to it for all of the reasons that I announced one year ago but we are making savings. I've said in the Parliament yesterday and I have said repeatedly over the last couple of weeks that because of events in the global economy, and because of lower global growth, that has a flowthrough to revenues in our budget and in this mid-year review we will be making savings and we will be making further savings as we announce the mid-term review, that is one of them.
PM: OK, just in the interest of fairness we'll go to Karen, who probably hasn't been able to muscle her way to the front with her sore foot. Yes?
JOURNALIST: Prime Minister, the Greens still seem to be saying that they're reserving the right to vote against this in the Senate. How is this a done deal if they still say they might block it? What are they asking you for that they haven't got already?
PM: Well, you'll have direct those questions to the Greens, but the proposition that will be before the Senate now is the Minerals Resources Rent Tax - yes or no? I fully expect that the answer will be yes.
JOURNALIST: How can you say that you've delivered it if they're still saying they reserve the right to vote against it?
PM: Karen, I think you are aware that in terms of the stated positions of people in this Parliament, this is a Government determined to deliver this Minerals Resource Rent Tax. We've delivered it through the House of Representatives. I very much expect - indeed, have no doubts - it will go through the Senate.
Katharine?
JOURNALIST: Prime Minister, I understand your rationale about wanting to inform stakeholders about what you agreed with the Greens last night, but in terms of proper process, shouldn't you have delayed the vote?
PM: This was a modest savings measure, a 1-year pause we had in contemplation in the context of MYEFO. As a Government, we determined to action it. The thing we wanted to do was to talk to stakeholders before it was publicly announced and we were in a position to do that this morning.
OK, we'll just take a last one here and then we'll go, thank you.
JOURNALIST: On another matter, the Bill O'Chee allegations that were raised today in the Fairfax Press, I obviously don't expect you to comment about it specifically, but more broadly, does it raise any issues in your mind about the role of the media in Australia?
PM: I've seen those reports and it's reported that there's an Australian Federal Police investigation, and on that basis I won't be drawn in the specific or the general.
Thanks very much.