The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 17/03/1999

Transcript No. 99/17
Treasurer
Hon Peter Costello MP

Interview with Alan Jones, 2UE

Wednesday, 17 March 1999

7.15 am

E&EO

SUBJECTS: Family assistance, tax reform

JONES:

Wherever you turn there is widespread public concern about the breakdown of the family. Your letters to me about this subject in the last couple of weeks have been a continuing stream. At the same time we’ve had political leaders boasting that we’ve got high economic growth, yet research showing that the bottom 70 to 80 per cent of Australians have seen their incomes stagnate or fall over the last 15 years. They wonder where the benefits of economic growth have gone. Certainly not to the low and middle-income earners, more to the high income groups. But when the stockmarket looks like faltering, the Reserve Bank cuts interest rates and eases money supply. That helps the top end of town. But small business and farmers are still paying 9 to 12 per cent interest on loans and overdrafts, that when you put bank and Government charges and include them in the cost of the money. It is valid to argue that we need a different form of economic growth, that we need vital assistance for small business, for family farms and rural communities. I’ve called for a development bank for low interest lending. Small business is our biggest employer. And I have talked about the need by Government to undertake major works to revive and expand the nation’s deteriorating infrastructure, that would expand full time jobs, and that is important. There are a million children in this country, living away from one of their natural parents. There are another three quarters of a million living in homes where no one in that home has a job. Twenty per cent of men between the ages of 24 and 45 have an income of no more than $15,600. Another 12 per cent have an income between $15,600 and $20,788. Those people surely can’t support a family.

Research shows us that married men in the lowest income groups are more than twice as likely to be divorced or separated than their higher income counterparts in the same age group.

Marriage decline in this country is most pronounced in those who are on low incomes, and least influenced by postmodern values. In other words unemployment, part time work and low incomes are central to marriage decline. As I said, a million children in this country living away from one of their natural parents. In 1986, 14.6 per cent of families were sole parent families. In 1996 that figure’s 30 per cent. In the past decade the number of babies born to unmarried mothers has increased by 70 per cent, we have the third highest divorce rate in the world. In 1996 the Family Court granted 52,000 divorces. The cost of marriage breakdowns is enormous. And we have been asking this question, why are marriages collapsing? Why are families breaking up? And it is the children who are the victims. Where love and care and attention and time offered to them are less than is needed. And then we find the children who are idle or unloved or for whom there is inadequate time, become victims of an anti-social culture. We are talking about real emotional social and psychological problems, with our children being led into alienation, isolation, unemployment, violence, crime, drugs and the lot.

When I interviewed Dr Lucy Sullivan the phones here went to meltdown. You know from your own experience what I was talking about. It was at a time, two weeks ago, when a national wage case was being heard in which the ACTU argued that low paid workers and their families were living on wages below the level required to provide a modest but adequate income. I told you about the 36 year-old labourer in a small factory that manufactures doors, who was raising children aged six and nine on a full time net weekly wage of $325.00. A 40 year-old female hotel cleaner, who argued she had about $40.00 week left after basic expenses from her net income of $355.00 a week. Lucy Sullivan was arguing that Governments fail to discriminate in anything but a token way between the pay packet of the parent and that of the single wage earner. They argued that the loss of status for the family was damaging. She described the 1970’s as the decade of the moral rejection of the family, and the belief that children are ephemera, with no impact on employment. She described the 70’s as the decade which saw the dismantling of the provision, the careful provision, in the tax system, which had acknowledged that the proper raising of children required the care and attendance of one parent, the mother, who must therefore withdraw from income earning work. And the proper raising of children made a large call on the family’s remaining income, brought into the family historically, by the father. Dr Lucy Sullivan went right back to the Harvester judgement of Mr Justice Higgins in 1907, which established what was called a basic wage. And without rehearsing those arguments again, your letters to me demanded that I speak with the Federal Treasurer, Peter Costello, himself very much a family man, and he is on the line. Peter Costello good morning.

TREASURER:

Good morning Alan.

JONES:

I sent you that information about Dr Lucy Sullivan. I hope you read it.

TREASURER:

Yes I did.

JONES:

She talked about the Harvester judgement providing for, "the normal needs of a family of five living in a civilised community".

Now that wasn’t the absolute minimum wage was it, it was the minimum adult wage.

TREASURER:

Yes it was, it all came from a concept which is first called the minimum wage that the Arbitration Commission used to sit down and work out what you would need to be paid to be a married person supporting a wife and children, and that’s what they would award as a minimum.

JONES:

We don’t have that now do we?

TREASURER:

We don’t have that now because the pattern of the workforce has changed considerably, including the entry of women into the workforce. It was very much a wage which was for a man, because it was a man supporting a wife and children. Obviously where married women went into the workforce, as they increasingly did after the second world war, a concept of a man supporting a women with children was not relevant to them.

JONES:

But Peter the key thing there wasn’t it was that when they set the basic wage back in 1907, the wage for people without dependents was often as much as 50 per cent lower, deliberately so, on the principle that a contribution was made from the labour of a single person to support the income of the family.

TREASURER:

Oh, but it wasn’t just a single person, wages for women were less than for men too. Part of the concept was that you had one wage for men and another for women, because a man would be supporting a family and a women wouldn’t and….

JONES:

A single man wasn’t getting the basic wage?

TREASURER:

No single men got a lesser amount and women got a lesser amount.

JONES:

Absolutely, and that is the point that a lot of my listeners are making.

TREASURER:

Yeah, well I think that is a fair point. But I’m sort of also making the other point that I don’t think in this day and age, and I certainly wouldn’t support it, you could have one wage for a man and another for a woman doing the same job.

JONES:

No, no, we’re not saying that. What I think we’re saying though Peter is, that how do you encourage the family other than by a tax system which recognises that the cost of supporting the family is far greater and should be recognised in the structures, rather than have the single income earner being taxed in much the same way as the family man on the same income.

TREASURER:

Sure, well this is of course what we are doing with our tax plan, which we have currently got into the Parliament. With our tax plan if you happen to be supporting dependent children you get a tax-free threshold for each additional child that you have. And if you happen to be a single income family supporting a child, that is where there is only one breadwinner in the family, you get an additional tax-free threshold of $5,000. So if you happen to be that example you give, of the man with the, a married man on a one income family with say two children, you get a $2,000 tax free threshold in addition for each child, plus $5,000 for being a single income family, which is an additional $9,000 tax free threshold which you add onto the 6…..

JONES:

(inaudible)

TREASURER:

….well we’re taking it up to $6,000. It’s at the moment, it’s at $5,400.

JONES:

A typical income family with two children under your new proposal would go to $15,000 without paying any tax.

TREASURER:

Yes. Gets the $6,000 than gets $2,000 a child, gets another $5,000, so they get 5, 7, 9 plus 6, $15,000 tax-free threshold. Whereas the single income person without any dependents gets a $6,000 tax-free threshold. So they start paying tax on every dollar after $6,000. The family man, in your example, starts paying tax after the first $15,000. Now, that’s not the only benefit we give to families, because in addition to that we are also increasing family assistance to give families a better go under the family assistance package. And one of the things that when we sat down and we looked at the tax system, we came to the same conclusion, that the tax system was not giving enough support to the family which was raising children and, you know, everybody talks about this tax reform as GST. That is part of it, but why are we reforming the indirect tax system? We are reforming that so we can reduce income tax rates, increase tax free thresholds and give better benefits to families.

Now, I pay tribute to the people who are opposing tax reform in this country because they have managed to make out as if there is only one part of tax reform in the Government’s plan in the Parliament, namely GST.

JONES:

Where there is the $13 billion alteration to the whole tax structure….

TREASURER:

$13 billion of tax cuts for families and increased family assistance and increased family thresholds, which is why we are doing all of this to help families.

JONES:

Right. Now, Lucy Sullivan, exactly, well I mean, that’s why I wanted to talk to you because this is a bigger issue I think than often the public debate suggests. Now she says that the withdrawal, there was a withdrawal of Menzies, the Menzies Government had those family deductions, anything from doctors, dentists and chemists, school books and so on, and that was than replaced by this Family Allowance which was a flat rate. But then suddenly Labor Governments put an upper threshold on eligibility for it, and it was not adjusted for inflation. And so the argument is that a family on $75,000 is well off. Now it is not by the time all those costs are paid for the kids.

TREASURER:

Yes, well again, this is part of our tax plan. This is one of the precise things that we are dealing with. We are extending that income test so that the family with two children in the example that you gave would get those benefits right up to $76,000, indexed, up to $76,000. But we are doing another thing, which is very important. At the moment if you earn an extra dollar under family assistance you lose 50 cents of your benefit, right. So let’s suppose you are on $30,000 with two children and you earn an extra dollar, they start withdrawing your family assistance at the rate of 50 per cent, for every dollar you earn you lose fifty cents of family assistance. Another thing we are doing is, we are changing that. We are reducing the taper rate to 30 per cent, so that for every dollar you earn, instead of losing half of your benefit, you keep two thirds of your benefit, so that the people that were being income tested out on middle incomes, will be able to get that family assistance as well. As I say, I pay credit to the opponents of tax reform, that they have managed to totally ignore the benefits to family and your listeners probably think tax reform is only about GST.

JONES:

No, they have heard me say that it’s foregoing a lot of other benefits. We are not all that happy about these delays. I just want to come right back to the end of the debate though, because even as you speak there now, and you know what you are talking about, you must surely understand that even if you spoke to your wife or the neighbour, that it does get very complicated. What Lucy Sullivan said was, get rid of all those arrangements that you’re paying to families and give a child 0-13 a $60.00 a week rebate, she said that’s about $3,000 a year, one of 14-17, $80.00 a week, one of 18-20, $100.00 a week. Administer it through the PAYE and there you are. There’s a very simple formulae to say to families, well hang on, you may not be paying any tax at all. That rebate will provide you with a tremendous capacity to be able to pay the family bills. Why do we have such a complicated system?

TREASURER:

Well I couldn’t agree more. We have, I think, 14, 12 family benefits at the moment. Minimum family allowance, family allowance, family tax payment, basic parenting payment, guardian allowance, family tax payment, childcare. I could go on.

JONES:

Amazing.

TREASURER:

It is absolutely amazing, and I can tell you, I mean, I am confused about this. So again, part of our reform is to collapse all those 14 payments into three, so you are only going to have three now. We are then going to set up something called the Family Assistance Office, and it is going to administer all of these payments.

At the moment you have got some payments that are being administered by the Tax Office, there are some payments being administered by Centrelink. Now I said there are 12 to 14 of them…..

JONES:

Are you confident though, because I know you believe in having someone at home to look after the children, are you confident though, that this will give parents the choice, an affordable choice of being able to keep one of the parents at home for that important job of parental care?

TREASURER:

I am confident that it is going to dramatically improve the situation on the current situation.

JONES:

You see the feminists mounted an attack, which was Lucy Sullivan's point wasn’t it, on tax provisions which supported the family, arguing that they provided the capacity for mothers to stay at home and they were just a tool of patriarchal oppression, and they were withdrawn, mothers would be forced into the workforce where they should be for their own good anyway. And that really has been very costly hasn’t it to the status of the family and the necessary care for young kids.

TREASURER:

I think that’s right. I think the point is that women should be given choice. There are some women Alan, and let’s be frank about this, that want to work and they should be entitled to work, and they shouldn’t be discriminated against in any way. There are other women who will choose to stay at home with the children, and by changing the tax benefits in all of the ways that I have mentioned, they will get a better deal.

JONES:

So you’re saying that a family on $75,000 total income, will be much better off or slightly better off?

TREASURER:

Oh a family, a family would be substantially better off, because not only are they getting those increased tax-free thresholds, right, they are getting tax cuts. Don’t forget we are cutting income tax rates right across the board.

 

JONES:

Sure, what I am saying is the single person on $75,000 gets those tax cuts as well.

TREASURER:

As well, but what they don’t get is, they don’t get the increased tax free threshold, they don’t get the increased family assistance, they don’t get the improved income test on the family assistance, they don’t get the improved taper rate in relation to that, and they don’t get the benefits that come about from collapsing all of those payments into three and increasing them.

Now, part of our tax plan is to dramatically improve the lot of families, including the single income family. It was drawn for that purpose Alan. And what stands between implementing this and the current situation at the moment is the Senate and the Labor Party, you know, let’s come back to, you are going to say to me next, why haven’t you done this already? Well, this is what we are trying, we fought the election on it, we fought the election on it, we are trying to get it through the Australian Senate, this takes legislation, it’s taxpayers money. It can only be done by legislation. You’ve got people that are running around trying to interfere with tax reform. Let’s put the cards on the table, they are interfering with a better deal for families. Now, they never tell you that.

JONES:

It is a matter of family survival in many instances isn’t it? It is really up for grabs.

TREASURER:

Look, I think, and I am a parent too, you know, I think that parents are feeling, particularly as their kids become, sort of, teenagers, there’s so many difficult and destructive impulses in society, how do you sort of keep them on the straight and narrow, and you gave the statistics out about family break up and it worries us all.

JONES:

When you get the thing through, we’ll talk again and put some specifics to those general principles you’ve outlined.

TREASURER:

I would love to do that Alan.

JONES:

Thank you for your time.

TREASURER:

Thank you.