Following today’s vote in the Senate to repeal the mining tax, the Treasurer, Joe Hockey, says the government has delivered on another of its election commitments.
Hockey, speaking at a joint press conference with the Finance Minister, Senator Mathias Cormann, said the government had secured the best possible deal it could in the national interest. He attacked the Labor Party for dealing itself out of negotiations. The Palmer United Party was only relevant, Hockey said, because the ALP would not negotiate.
Cormann also blamed Bill Shorten for the delay in increasing the compulsory superannuation contribution. Hockey said the outcome wasn’t the government’s preferred position but that it was the ALP preventing it delivering on its election commitments.
- Listen to Hockey and Cormann (15m – transcript below)
- Watch Hockey and Cormann (15m)
Media release from Treasurer Joe Hockey and Finance Minister Senator Mathias Cormann.
Failed mining tax finally gone
The Government has delivered on our commitment at both the 2010 and 2013 elections to scrap the failed Minerals Resource Rent Tax (mining tax).
Along with scrapping this failed tax we are abolishing or re-phasing all of the unfunded promises that Labor irresponsibly and recklessly attached to it. The tax package was so poorly designed, it was in fact costing the Government billions of dollars each year.
While the Government’s negotiated package will be budget neutral in the medium term, abolishing the complete mining tax package will save the Budget around $50 billion over the next decade.
The Government has agreed to delay the abolition date of the following associated spending measures:
- the Low Income Superannuation Contribution will be abolished from 1 July 2017;
- the Income Support Bonus will be abolished from 31 December 2016; and
- the Schoolkids Bonus will be abolished from 31 December 2016.
The Government will, in the interim, also apply an income test to the Schoolkids Bonus limiting eligibility to families with an adjusted taxable income of $100,000 or less.
This takes total forecast net savings to more than $10 billion over the current forward estimates. The total financial impact of the negotiated measures will be a cost to the current forward estimates of about $6.5 billion.
The reduction in savings will be recovered in the medium term by re-phasing the superannuation guarantee increase. The superannuation guarantee rate will be paused at 9.5 per cent until 1 July 2021. After this the superannuation guarantee rate will increase 0.5 per cent each year until it reaches 12 per cent from 1 July 2025.
Given that increases in the superannuation guarantee are largely funded from reductions in take-home wages or business profits, re-phasing the superannuation guarantee puts more money in employees’ pockets while reducing businesses’ overall wages bills, boosting near-term economic activity.
Transcript of joint press conference with Treasurer Joe Hockey and Finance Minister Senator Mathias Cormann.
HOCKEY: Thank you everyone for coming. Today, the Mining Tax is finally gone. It has been a long and sorry saga for Australia and the mining industry, to have a Mining Tax that did so much reputational damage to Australia and in at the end of the day combined with the spending measures, left the Budget significantly worse off.
As a result of this initiative passing through the Parliament today, the Budget overall will be about $50 billion better off over the next decade. In the short term, it will have a negative impact on the Budget over the next four years of around $6.5 billion but that will be recovered by delaying the increase in the superannuation guarantee to 12 per cent as an offset in the overall cost over the medium term.
Since the 2nd of May 2010, when the original version of the Mining Tax was announced, the Mining Tax has caused enormous uncertainty. It has been a dead hand on the mining industry, but most importantly it has had significant reputational damage on Australia. As a result of getting rid of this today, together with the Carbon Tax, we are delivering in full on our promises.
When we were elected, just on 12 months ago, we promised the Australian people that we would set about strengthening the Australian economy and strengthening the Australian Budget. That’s exactly what we are doing. We inherited 93 announced and unlegislated taxation changes and we have now dealt with most of those. We inherited a Budget with major structural problems and in fact the Government failed to properly fund entities like the Reserve Bank and the ACCC; we set about fixing that. We said we were open for business, we’ve got on with the job of reviving the appropriate approvals for foreign investment but at the same time we’ve signed new Free Trade Agreements with Japan and Korea. We have also said that we are going to end the age of entitlement starting with big business and we have done exactly that. They were hard decisions. They are not easy decisions, and we know that the Budget has been tough, but this is the only way that we are going to ensure prosperity and job creation into the future.
Fundamentally, this is all part of our Economic Action Strategy which is about delivering jobs and delivering prosperity. Certainly, there is momentum in the economy, not as much as we would like. And that’s why our infrastructure package announced in the Budget is going to kick in over the next two years, to help to deliver the jobs of the future. Now, the fundamental point is this; we came into Government to govern. That means dealing with the cards that we have, the cards as they have fallen in the Senate have delivered us some challenges but we have worked our way carefully and methodically through those challenges.
The Labor Party has been totally obstructionist at every point, every single point, and they have dealt themselves out of the debate. The Greens have dealt themselves out of the debate since the time that they agreed to our change to the debt limit, they’ve refused to be actively engaged in negotiations. As a result we negotiate with those who are prepared to discuss the matters.
In relation to the Mining Tax, this is exactly what we promised. We promised to get rid of it, and we’ve delivered. I pay great tribute to my colleague and friend, the Minister for Finance who has helped to steward through the Senate. I’d ask him to go through some of the initiatives and then we’ll take questions.
CORMANN: Thank you very much Joe. Today is indeed a great day for Australia. The Mining Tax was always a bad tax, it was a failed tax, it was a tax that was holding Australia back. The Senate today voted to help the Government build a stronger more prosperous economy and to repair the Budget. Getting rid of the Mining Tax is indeed good news when it comes to attracting more investment and creating more jobs.
Now, in the Senate today, we were able to get a repeal package through the Senate which involved some adjustments to our original package. We went to the last election promising that we would get rid of the Mining Tax and that we would get rid of the unfunded promises that Labor recklessly and irresponsibly attached to it. The Senate voted against our proposals on two occasions. In the middle of July the Senate voted to repeal the Mining Tax but to retain three particular measures: the low-income support bonus, the low income super contribution and the SchoolKids Bonus. Since that time, the Treasurer and I have been working with cross-bench Senators in particular to achieve a consensus in order to have us get the best possible outcome, delivering the repeal of the Mining Tax and also delivering the best possible improvement the Budget in the circumstances. So, what we’ve agreed and what was passed by the Senate today as you would now be aware, involves retaining the SchoolKids bonus on a means tested basis until after the next election, it involves retaining the low-income support bonus until after the election and it involves retaining the low-income super contribution until after the election.
Now, this was not our plan A. This was not our preferred plan. But this was the best plan we could get. The savings, as we indicated, over the forward estimates, will be more than $10 billion, which is about $6.5 billion less than what we would have liked. But over the decade, the total savings as the Treasurer has indicated will actually be in the order of about $50 billion. Importantly, the additional cost over the forward estimates from the adjustments that we agreed to in the Mining Tax repeal package will be offset by the end of 2023 as a result of the adjustments that we also made to the increase in compulsory super.
Now I have seen the range of comments made by Bill Shorten as the Leader of the Opposition. I will just point out again what Bill Shorten said as Minister for Financial Services and Superannuation in government. That is, that increases in compulsory super come out of people’s wages. That’s not my quote that is, literally, Bill Shorten’s quote. Now, by us making the adjustments that went through the Senate today we allow people to keep more of their own money pre-retirement for people to decide themselves whether they want to use it to pay off their mortgage faster or whether they want to save it for superannuation on a tax effective basis. So, some of the hysteria that has been coming from the Labor Party is quite dishonest and hypocritical, given that it was Labor in the first place that did everything they could to stop us from implementing our election commitments and given what Labor has said in the past in relation to these matters.
REPORTER: Mr Hockey given you have had to make a compromise and accept (inaudible)
HOCKEY: I am not going to speculate on surplus, Phil.
HOCKEY: Yeah, I know, it does have an impact – a negative impact on the foreword estimates; we are dealing with that.
CORMANN: The important point here is that updates are made on the usual basis. The next update will be in the Mid-Year Economic and Fiscal Outlook and in the meantime, what the Government is doing, we are doing what we said we would do all along and that is implement our Budget measures in a orderly and methodical way, one by one including though the Senate as we did with the mining tax repeal today.
REPORTER: Given what you are saying about increases in superannuation coming out of people wages, do you still think that increasing the superannuation guarantee to 12 per cent is a worthy aim and just a secondary part of that question: the Financial Services Council is saying that delaying it by seven years will cost, I think almost $128 billion; does that not mean more people will be reliant on the pension and is that not what this (inaudible) is trying to achieve.
HOCKEY: This is not our preferred option but it is the only option that has been on the table and if people think that this is going to have a long-term impact on their superannuation, blame Labor, they wouldn’t let us keep our election commitments. This is entirely their fault. I mean, they are the ones who have the number to immediately pass the Legislation. Understand this, Clive Palmer is only relevant because Labor and the Greens keep voting with him. He can’t have any influence unless he gets the votes of Labor and the Greens and the fact that the Labor Party and the Greens keep voting with Mr Palmer makes them irrelevant and it means that we have to deal with those people; not just Mr Palmer but also a number of other independents to get things through. Now, it has always been a work in progress. We said that we would work carefully and methodically and engage with everyone which I have been doing; Matthias has been doing. We have been working it through, ignoring all the speculation, dealing with the facts and this is part of the delivery but there is more work to be done.
CORMANN: Now, in relation to the specific question you asked on the 12 per cent. Well clearly we still support it because the Government amendments today of course, which were passed by the Senate, still provide for the increase in compulsory super to 12 per cent except that it will now happen by 1 July, 2025.
REPORTER: But Treasurer, you didn’t promise at the last election that you would delay the ESG increase in this way. So, why didn’t you hold your nerve, stick to your election commitment on the super guarantee increase rather than make this compromise which breaks your election compromise?
HOCKEY: Well, we would have never got it through. It is as simple as that.
CORMANN: The alternative was not to get $50 billion in savings over the next decade. The alternative was not to have $10 billion of savings over the forward estimates. The alternative was for the Mining Tax to continue to remain in place and hold Australia back when it comes to generating stronger growth to create more jobs. So we went for the best possible deal that we could achieve in the national interest.
REPORTER: So, the Palmer United Party’s basically (inaudible) deal in the next election. Do you think that any of these measures – I mean, you sort of answered the question on super, have merit in themselves, so that if the fiscal situation allowed it, you might actually consider putting them back to voters in 2016?
HOCKEY: Well, the starting point is, if Labor is going to re-introduce the Mining Tax, which is what they say is part of their $21 billion of savings by the way. They actually say that they are going to re-introduce the Mining Tax and the Carbon Tax; they are claiming the Mining Tax will raise $3.3 billion over the next four years as part of their $21 billion. I don’t know how they got that figure but it is divorced from reality and so, but they are saying they are going to re-introduce that as part of their $21 billion of savings and they are going to re-introduce all of the spending measures. Well, that is a magic pudding like I have never seen. Now, the fundamental point is, we will tell you what we are promising at the next election, as we get closer to the next election. We haven’t made the 12 month mark yet but we promised we would do what we have done and that is being delivered in full and you know, it doesn’t always turn out the way that you might necessarily want but we can only deal with what we have and I think this was a damn good deal for the Australian people.
REPORTER: Today, your colleagues say that you told them this morning that WA was the least reformed Government in the country; what do you want the Barnett Government to do to meet your high expectations?
HOCKEY: Well, I must say I am glad that the Barnett Government is undertaking a number of reforms including the selling of a number of assets and therefore they will have access to the Asset Recycling Pool which is a huge opportunity for them to re-invest in new infrastructure. I understand where Western Australia is coming from in relation to the GST, I certainly do, and that is something that is going to be very actively considered as part of the Federation and Tax White Papers.
REPORTER: On the GST, I understand that the Prime Minister also said today to the Party Room that if there is going to be a solution to this then the money should not come from the smaller states, but from the larger States so Victoria, New South Wales and Queensland. Is that your preferred solution to this problem? And I would like to put that also to dear Mathias.
HOCKEY: Well, he was negotiating at the time so I am going to leave him – well, you can add whatever you want Matthias as a West Australian, I’m not going to stand in the way but the bottom line is, we are here to govern for the whole nation, that’s what we are focused on and you can understand individual Members or Senators advocating for their state or district or their community, that is appropriate as it is; we have a duty to act on behalf of the whole country.
CORMANN: I might just add here, Collin Barnett is an outstanding Premier for the great State of Western Australia and I work with him very closely. It is very appropriate for the Premier of Western Australia to advocate strongly as the leader of the Government in Western Australia on behalf of Western Australia in the way he does. Obviously, for those of us with national responsibilities, we do need to ensure that whatever policy solutions we develop over time in relation to this and other matters are fair and sustainable on a national basis.
REPORTER: On the $6.5 billion in the short-term (inaudible), will you try and make further savings measures to make up for that or will you (inaudible)?
HOCKEY: We will see how we go; we will see how the bottom line is.
CORMANN: The important point, this is Budget neutral between now and 2023
REPORTER: But Mr Hockey, you have previously said in speeches and comment and what have you that you would look to make further savings…
HOCKEY: We are always looking to make savings
REPORTER: Just on pushing the superannuation out now, twice: haven’t you put it so far out in the distance that it is really meaningless? You can’t make any sort of commitment that far out?
CORMANN: Well, anybody that is concerned about that, blame Bill Shorten because if Bill Shorten had respected the mandate that we received at the last election, we wouldn’t be standing here today. The Mining Tax would have been repealed and the compulsory super increases would have been in place consistent with what we said we would do before the last election. The only reason there is a further delay is because that is the only way that we could get legislation that is in the national interest, through the Australia Parliament.
HOCKEY: Okay, thank you very much.