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Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 23/09/2004

TRANSCRIPT

THE HON PETER COSTELLO MP
TREASURER

Interview with Catherine McGrath
AM Programme, ABC Radio

Thursday, 23 September 2004
8.05 am

 

SUBJECTS: Labor's tax policy costing black hole

MCGRATH:

Treasurer, good morning.

TREASURER:

Good morning.

MCGRATH:

Do you stand by your criticisms made yesterday about the black hole?

TREASURER:

Yes. If you fund the low income tax offset and Labor's working tax bonus in 2005-06, the amount which has been allowed is $700 million short. The Melbourne Institute said that that is because they assumed that the low income tax offset would be paid the year before, that is clearly wrong. Clearly wrong. NATSEM, as I understand it now, is saying that they haven't allowed for the full value of the working tax bonus.

MCGRATH:

Well let's explain this for our listeners who may easily get confused by all of these numbers…

TREASURER:

Sure.

MCGRATH:

…running around. What we are talking about is the low income tax offset that will finish if Labor gets in at the end of this financial year, that payment would happen in the next financial year and what would come in is the working tax bonus. Now what you said yesterday is that there is a $700 million black hole. Now NATSEM, a highly credible organisation, says that that is simply untrue.

TREASURER:

No, because NATSEM has allowed for $2.6 billion when the full cost of the working tax bonus is 3.2 or 3.3 – that is the $700 million…

MCGRATH:

Well that is your assessment, that is not their assessment.

TREASURER:

…well no, their assessment I think is that it is 3.1, I say is it 3.3. But whichever way you do it, even on their figures, there is a $500 million hole, and on my figures there is a $700 million hole.

MCGRATH:

Well I don't want to lose the audience here but the point is what NATSEM have said when they have explained their costings to us is that they have costed the low income tax offset for the next financial year. They have also costed the working tax bonus for the next financial year. What they have done is they have rolled 15 per cent of that working tax bonus into the following year. Now that is quite economically appropriate to do that if they choose to do that, they have costed it, you have said they haven't, they have.

TREASURER:

This is the thing I love about putting the acid on the policy – you put the acid on the policy and what popped out overnight? The working tax bonus is funded 85 per cent in 2005-06. Do you know what that means? That Labor is offering no weekly tax cut to 1.1 million people in 2005-2006…

MCGRATH:

Well with respect, it doesn't mean that at all.

TREASURER:

…no, no, because if 100 per cent took up their entitlement in 2005-2006, even NATSEM admits, it would cost $500 million more, I say $700 million.

MCGRATH:

Treasurer…

TREASURER:

So what has popped out tonight for the first time, and I have got the policy here in front of me, Labor never said by the way, that they were only costing for 85 per cent, they never said that 1.1 million people were excluded from these weekly gains. You put the costing pressure on them and a new fact has now emerged and the new fact is this: when Mark Latham said that he was offering a weekly tax cut, he has excluded from funding 1.1 million people from that offer.

MCGRATH:

…with respect Treasurer, you have actually changed your tune since yesterday. Yesterday you said there was a black hole over the low income tax offset. Now you are claiming a black hole, not over that, that doesn't exist anymore, you are claiming it over the working tax bonus. However, it has been funded, according to NATSEM, for the next financial year, as well, with the 15 per cent rollover. Now that is quite economically appropriate, I mean you might not like it…

TREASURER:

No, the facts are these…

MCGRATH:

…but it is not wrong, it is not a black hole.

TREASURER:

…there is a $700 million shorthole, shortfall, if you want to fund the low income tax offset and Labor's working tax bonus. We now all agree on that. So what NATSEM is now saying…

MCGRATH:

No I am not sure that…

TREASURER:

…oh yes we do, what NATSEM is now saying is, we didn't fund the working tax bonus 100 per cent, we funded the working tax bonus 85 per cent, we excluded 1.1 million people from it. Now, I agree, if you exclude in 2005-2006, 1.1 million people from any weekly gain under Mr Latham's tax policy, it will cost a whole lot less…

MCGRATH:

Treasurer, I don't want to get into an argument…

TREASURER:

…but I have got the policy here…

MCGRATH:

…(inaudible).

TREASURER:

…but I have got the policy here…

MCGRATH:

Well just a minute…

TREASURER:

…it is just one fact that he omitted to mention, that there are 1.1 million people that this doesn't apply to.

MCGRATH:

…one point with respect that you have omitted to mention, which is that this new working tax bonus can be paid weekly or it can be taken at the end of the financial year…

TREASURER:

Yes.

MCGRATH:

…so, NATSEM has made an assessment that 15 per cent of the people may do that. Now, just to finish off because we are nearly out of time, will you stack your economic credibility on the claim that you have made?

TREASURER:

Yes and I want, I would like NATSEM to release its full documents now. Mr Latham promised that NATSEM would release its documents on the 7th of September and also, we are now 16 days since this policy was released, we are 16 days from an Election, the Labor Party refuses to put it in. Now the biggest point is that Mr Latham today has said he will include elements of his tax and family policy for costing. This has to be put in immediately because when it is put in, you will find that there will be so many changes to this policy that it will unravel even faster than it already has.

MCGRATH:

Treasurer Peter Costello, thank you for speaking to AM.