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 09/05/2006

Interview with Anton Enus
SBS

Tuesday, 9 May 2006

SUBJECTS: Budget 2006-07

ENUS:

…tax reform, as many people have called for under the more populist approach of cutting taxes?

TREASURER:

Oh, this is huge tax reform. This is certainly the biggest since 2000, and in some respects bigger. We have a major income tax reform, cutting rates and raising thresholds. We have a major business tax reform on small business and on depreciation, and we have the biggest superannuation tax plan, probably that there has ever been. So, what this will mean, is that if contributions are taxed, and your payments in the fund are taxed, then when the benefit is paid out, there will be no tax. No tax on a lump sum, no tax on a pension, no reasonable benefits limits or age based limits. The biggest simplification of superannuation tax we have ever had.

ENUS:

But what is the status of that super plan? It is not set in stone at this point, is it? We could lose some of that, some of the benefit?

TREASURER:

Well no, it will be coming into effect on 1 July 2007. We have said that we are happy to consult with the industry, there will be a lot of technical issues in there, but we have set aside the money, it has been factored into the Budget and we will go ahead with it.

ENUS:

You said that you have announced tax cuts across the board, but with a special emphasis on middle income families. Don’t you think that low income earners might feel a little aggrieved, after all they are facing a lot more pain than anyone else?

TREASURER:

Well we do two things to help low income earners. First of all we increased the low income tax offset. And that means if you are a low income earner you won’t pay any tax until you get to $10,000 of income. And secondly, what we do is that threshold, 15 cent threshold, which used to go to $21,600 now goes to $25,000. So, that provides very good tax reductions for those at $25,000 and below.

ENUS:

The tax cuts obviously put a lot more cash in consumers pockets. The Reserve Bank recently raised the interest rates as a pre-emptive move against inflation. Aren’t you concerned that putting more cash into the pockets of consumers might undermine that structure?

TREASURER:

I don’t think so. We forecast the inflation to be around 2 ¾ per cent, our goal over the course of the cycle is to keep it between 2 and 3, and this I think is quite consistent with a solid growth, low inflation economy and we will have the best Budget surplus at the end of it which will mean that the Government adds to savings.

ENUS:

Mr Treasurer, the manufacturing sector as we all know is struggling with massive job losses. What is the vision there, for addressing that problem?

TREASURER:

Well, a really big improvement for business taxation here. If you are on a diminishing value, value bases depreciation, you will be able to write off new equipment faster and that will make it much more effective to buy new equipment, to stay up with world technology, and to compete with the best all around the world.

ENUS:

You also, of course, announced big spending in road and rail infrastructure, $2.3 billion, but isn’t there also a case to be made for massive long term shoring up of not just manufacturing and infrastructure, but also education and health?

TREASURER:

Sure, and we have got record investment in health, record investment in education. But we have managed to do these big projects too, if we can pull forward the completion of the dual carriageway, the Hume Highway between our two biggest cities, Sydney and Melbourne. If we can manage to put the biggest injection into the Murray-Darling Basin for irrigators, for environmental flows, for water conservation. These are big nation building projects and coming out of this Budget we are laying down for the long term.

ENUS:

One of the criticisms though, is that it is easy to announce huge amounts for infrastructure spending on the road and the railway, but there is no guarantee that it will actually be spent. Can you give us that guarantee?

TREASURER:

Sure, with road construction the Commonwealth does not actually let contracts, by the way. What we do is we pay it to State Governments who let the contracts out through their road construction authority. But, believe me, they will have a lot of incentive to do so. We will pay the money and I have no doubt that they will do it because they want to see these roads constructed as much as anybody else.

ENUS:

Mr Treasurer, thank you very much for your time tonight.

TREASURER:

Great to be with you. Thank you Anton.