Let’s start with wages growth. If I understand your argument on wages growth correctly, it’s the orthodox one: economic growth returns, the labour market tightens, wages growth happens. But there’s a live debate among labour economists about whether those linkages still hold. Why are you confident that the orthodoxies hold?

Scott Morrison: “I think it is true that post the global financial crisis initially and for some period after that and particularly with how the mining investment boom and commodity prices played out – there was a dislocation that occurred in some of the more traditional mechanisms. That was set out in a speech I gave to the Business Council of Australia last year based on some excellent work that Treasury had done, which demonstrated that the movement in commodity prices in the mining investment boom had basically led to an income increase which had got well ahead of productivity, so the normal interaction between these forces had become disconnected. But what the same research shows is now we’ve moved through that. That’s what gives me the greater confidence that we are getting back to a normal transmission – the normal rules on supply and demand. I don’t discount there being a dislocation post the GFC but I don’t consider that a permanent phenomenon and I don’t think the evidence bears that out. I think a lot of what we are seeing in financial markets at the moment is how all of that is starting to be reconciled.”

Do you accept there might be a lag in terms of when economic growth starts to happen and that might start to flow through to pay packets?

Morrison: “I think evidence will be lived on this. What I do acknowledge is there has been that disruption … but that is now subsiding as more conventional economic mechanisms kick in. To the extent there is a lag, I think that’s a reasonable question. In the US – because it’s not just Australia which has experienced flat wages growth, and let’s not forget flat wages growth was there for the entire period of the Hawke/Keating government – flat wages growth has been there in other developed economies but for slightly different reasons. I mean they didn’t have the impact of the commodities boom and the mining investment boom, that had a far bigger impact on wages and where they’ve been heading in Australia, and obviously that didn’t impact on other markets at all. The figures in the US last Friday were really so telling and they said to the financial markets, ‘oh hang on a tick, things are starting to return to normal here.’ This world of low rates, low inflation, low growth had been the sort of conventional wisdom. I mean, the IMF 18 months or so ago – that was what was on the slide. That breaking down, and normal transmission being resumed, is what markets are adjusting to.”

And the US economy has turned …

Morrison: “It has for some time and you are seeing it in wages now.”

But one of the reasons you are seeing it in wages growth, I would think, is 18 states [in the US] have raised the minimum wage, as well as the impact of economic recovery?

Morrison: “Well we raised the minimum wage [in Australia] and we didn’t see that happen.”

No, but the economic circumstances here are different: it’s parallel but not comparable in a way?

Morrison: “All economies are structured differently, the tax systems, the regulatory systems, the federal systems and that is as true of Australia and the United States as it is of Australia and Germany and the UK. These things have an impact, but you can’t go past the strong growth in the US economy, or the resurgence we are seeing in Europe and France and places like that as feeding the ability of firms to actually pay people more. The other thing that is driving things is it a very competitive global economy for people, whether it is in the US or elsewhere. Firms gain comparative advantage from how good their people are. Retaining and attracting talent is a key point of competitive advantage in the global economy. We are seeing that play out and there are implications for Australia too. The idea that companies now compete on who can pay their workers the lowest – that’s all changing.”

Do you accept in the Australian economy that a wages boost would benefit consumption and benefit the economy?

Morrison: “Of course it would.”

Is your proposed personal income tax cut when the budget can afford it – obviously I’ve got the government talking point, I understand it – is that a mechanism to achieve an effective increase in wages without lifting wages?

Morrison: “I think it complements it no doubt, and it also removes some distortions for middle income earners. We want to see people know that by earning more, they will do better and not be taxed more. You have to do that in the confines of the fiscal space that you have got, but of course, I think that’s where the real rub point is at the moment and we are trying to address that.”

So it’s important to do that sooner rather than later?

Morrison: “It’s important to do that sooner rather than later.”

Meaning the tax cut?

Morrison: “No middle income earners, and focusing on what they are experiencing right now. Because cost of living as measured by inflation is low, but where the pressures are on households are largely on fixed non-discretionary costs, particularly utilities, rent, housing, things like this. That’s why last year’s budget focused on things like medical, and the NDIS. Essential services loomed even larger for middle income Australians because their wages had been so flat, and they were more reliant on those things and keeping their living costs under control than they had been for some time.”

You can give people are tax cut. What about other mechanisms though, like increasing the minimum wage?

Morrison: “We have a process for dealing with that.”

But what’s your attitude?

Morrison: “I think we should continue to use the process that sets it.”

How will you use that process?

Morrison: “The way we always have. I don’t think we need a change to how that’s managed”.

I’m not talking about process, I’m asking you whether you think the minimum wage is too low?

Morrison: “Well, that’s summed up in the submissions made to that process and those submissions are usually quite neutral, as they were by the Labor party when they were in government.”

You are the treasurer. You can have views?

Morrison: “I do. I don’t choose to depart from that way of doing it. I think that’s the right way to handle it. Those views coincide with my own.”

I’m sorry to labour the point but I want to understand your thinking. So your approach to wages growth?

Morrison: “If you compare minimum wages growth in Australia to the US.”

It’s obviously better.

Morrison: “It’s not just better, it’s daylight. It’s a chasm between the two. I think the protections around minimum wages in Australia and the process for how they are determined is a very robust and inclusive one.”

You say the commonwealth’s position [on the minimum wage] is neutral.

Morrison: “Because we trust the process to deliver a fair outcome.”

Yes, but you could argue a position that wasn’t neutral?

Morrison: “But that would be assuming that I don’t think the process is delivering a good outcome. I think the process has served governments of both persuasions very well.”

So – you aren’t attracted to using the mechanisms a government has in order to increase wages growth, you are attracted to giving workers a tax cut, and soon if possible, and you think the economy will take care of the rest?

Morrison: “If you think about where is wage growth going to come from, it’s got to come from a growing economy. The money has to be there. By seeking to artificially impose this, well the swings and roundabouts approach would mean you end up with a zero-sum outcome. My view is we need the best environment for businesses to grow. That is the best opportunity to ensure wages can lift, not artificially, but sustainably. The other mechanisms you have continue to do their job: the progressive tax system, the welfare system. We shouldn’t [underestimate] the strength of those. I would argue those are some of the strongest in the world. The other figure I’m proud of as a government is we have the lowest level of welfare dependency of the working age population for 25 years. At a time when you have record jobs growth in Australia combined with quite significantly reduced reliability on welfare of working age people: that’s clear signs of a healthy and self-reliant society.”

Company tax cuts, let’s think about that. I heard your conversation [on the ABC this week] dissing the Australia Institute poll, but every piece of published polling I’ve seen on the company tax cut suggests is the idea is unpopular with Australians. A tax cut is popular with business for obvious reasons, not so much ordinary working Australians.

Morrison: “You can’t confuse mechanisms with outcomes. I didn’t frame the enterprise tax plan going into the 2016 election on the basis that it would be popular, I framed it on the basis of whether I thought it would be the right thing to grow the economy and would allow people to get more and better paid jobs. While some sought to mock ‘jobs and growth’, well it’s happened. It’s not the first time I’ve been accused of having three-word slogans which have come true.”

OK. Do you think workers could be persuaded of the benefits of company tax cuts if they thought they might get a wage rise, a wage increase out of it?

Morrison: “I think it happens at many layers. I think the public looks at a government to see whether they are doing things that will ensure [people are] better off. Is my employer going to be able to be in a better position to give me a wage rise and give me job security? I think people assess the package of what you are offering, particularly in the economy and the results are there. The contrast is – I don’t think they can point to a package which is being offered by the Labor party.”

What about the Japanese idea of a company getting a tax cut if their workers get a wage increase?

Morrison: “I understand that. It is a highly interventionist method. It’s at odds with the way the Liberal and National parties would pursue growth in the economy.”

Except you are the treasurer who has been interventionist in terms of federal Liberal treasurers. I could give you a couple of examples?

Morrison: “We just passed one: banking executive accountability regime in the Senate. It’s a highly regulated sector.”

There was a threat of government intervention in the gas market [by imposing export controls].

Morrison: “A very reluctant one.”

That was something I never thought I’d see a Liberal government do.

Morrison: “Sure, with the ultimate outcome of hoping, and ending up delivering, what was largely a market outcome. My point is our interventions, where they have occurred, have been quite specific. In the banking sector. In the energy sector. I’ve prefaced what we’ve done in both of those sectors by making it very clear they are not what you’d call very free market sectors. They’ve got a very special set of arrangements. Once you are in that sort of environment, regulations are going to be more apparent. But more broadly in the economy, when the government starts telling private companies how they should be spending their money and that they know better than them about how to grow their business, then I think we’ve got a problem.”

So there’s no chance [the Japanese idea of companies getting a tax cut if they gave their workers a pay increase] could happen?

Morrison: “It goes against every economic instinct of the Coalition to tell companies how they should be spending their money and growing their businesses. We trust them to grow their businesses and if we give them right incentives, and the right economic environment, and the right opportunity through trade … or the education system, they’ll go and make it happen. If we try and sit in their boardroom – I’ve made the case why we would exempt something in the finance sector and the energy sector because they are highly regulated sectors, we are already in there – as a principle, in a more free market environment, you let the business go and grow.”

But you also need the consumption growth in the economy.

Morrison: “The laws of supply and demand, as Malcolm has said, have not been abolished.”

I don’t think they’ve been abolished …

Morrison: “Well people are arguing that they have.”

No …

Morrison: “People are saying they don’t apply. That businesses will not behave as rational economic actors in the economy.”

This is a legitimate debate.

Morrison: “It is, but I don’t share the view that [the laws of demand and supply no longer apply]. There is too much evidence. The piece that [Professor Richard] Holden cited. It’s not often you cite Germany on these things, but they’ve looked at 12 years of tax policy experience and the reactions of business, and they’ve found [the benefits of a company tax cut are] passed through. And the reason it benefits people on low incomes and deals with inequality issues is because the benefits are shared equally. As a result, proportionally, they are affected more significantly. So, quote whomever you like: Chris Richardson, Professor Holden – Labor just keeping making excuses for why they don’t do this. I don’t think they believe it at all. Labor’s policy on company tax cuts is about politics, not about economics. I can be accused of many things but I don’t think not believing in things is one of them. I argue with the Greens all the time and they seem to have a fair consistency as well. Labor doesn’t believe anything. Bill Shorten will tell a Greens audience one thing about company tax cuts and he’ll sit in a boardroom and say the complete opposite. That’s why he can’t be trusted. Whether you are on the left or the right, he doesn’t believe anything and that’s why you can’t believe in him.”

That analysis notwithstanding, you still have the political problem as a government of pressing ahead with [an unpopular] policy that you think is in the economic interest of the country. So your rationale for it is the [economic] orthodoxy holds: it’s just been on holidays.

Morrison: “It’s been dislocated for the reasons that I think have been carefully analysed. It’s not a hunch”.

I want to have this conversation so I understand where you are coming from. I get [where you are coming from]. You still have a political problem, though, of championing a policy … one the voters think stinks.

Morrison: “I’ve seen that before, but you have to do what you think is in the economic interests of the country. We will make those decisions, we will make those calls, and we will stick to the course. That’s we are trusted more than Labor on the economy. I’ll cop the abuse from people who have wildly different opinions to me and don’t have the same level of conviction as I do that these things are right for the country. I won’t wobble on it. I think, as Mathias [Cormann] famously put it, Labor have wibble-wobbled on the economy for some period of time. It’s not something you could accuse Keating of, or others in his role in the past, but it’s something they’ve turned into an art form.”

A legacy question now. I’ve painted a picture of you as an interventionist treasurer, because I think you are, but you obviously think you are not.

Morrison: “I’m a pragmatic treasurer, that’s what I am, but the pragmatism sits on a bedrock of principle, which ultimately guides [me.] There are places you don’t go, there are places you do go, but when circumstances require it, whether its in the banking sector or the fiscal circumstances or the energy sector, you have to work with what’s in front of you to get the outcome. A practical treasurer will have the practical outcome firmly in mind. What’s the outcome? A growing economy, with increased investment, which will lead to wages growth and increasing living standards.”

But if you intervene on some things and then not others then you beg the question …

Morrison: “Only to ideologues. You’ve got to be practical as a treasurer, but you have to bring a clear set of principles which you know work, and you’ve got to stick to them, which is what I do.”

If you had to describe those principles in a sentence, what would it be? I know that’s a tough assignment, because a sentence isn’t much, but what would the sentence say?

Morrison: “It all comes down to enabling people to seize opportunities, and I think people are the best ones to work out how to do that. It’s not for me to tell them how to do that, or force them, or mandate it. All things being equal, taking the banking and energy sector as special cases …

Foreign investment?

Morrison: “… because they are special cases, they are not sitting in a free market.

“All things being equal, the individual, the enterprise, will make the right decisions for their own economic interests, and the less I can get in the way of that the better. But where practically, because the world is imperfect, and policy settings that have been built up over time, well, you have to deal with the practicalities of that. You’ve got to understand what you might do in a perfect world is ‘x’, well, you’ve got to do ‘y’, but the outcome is the same, and that is people at the end of the day having a high level of economic self-determination, from an Indigenous kids living in Hermannsberg to someone living in the Shire.”

In a speech you delivered eight months ago, you said the voters weren’t listening. Do you still think they aren’t listening?

Morrison: “I said they weren’t listening to any of us.”

I don’t think it was a reflection on the government, I think you were talking about the political class for want of a better term. You said there’s a gulf between us and them, voters think we are obsessed with partisan intrigue.

Morrison: “The politics of conflict, that sort of thing.”

Do you think that’s still true?

Morrison: “I haven’t reflected more recently. I’ve actually set about trying to change it.”

How do you think you can change it?

Morrison: “Just by being direct and honest about how you see things, not sugar-coat things and just be as real as you can be”.

You are a tribal politician. You pick up the cudgels for your own side and you go hard. Do you think that helps?

Morrison: “I just outlined why I would do that. I mean what I say about Bill Shorten. I’m being honest about it. I’d say the same thing at Northies.”

It’s a stupid conversation, ‘let’s take conflict out of politics’, politics is conflict, but …

Morrison: “That’s true, but the more real, connected and unvarnished approaches are the ones people can identify with.”

So you are saying is if people think you are fair dinkum, they’ll believe you?

Morrison: “This is why Bill Shorten will never be successful. He’s a phony. Voters have worked it out.”