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 10/05/2006

Interview with Ray Hadley
2GB

Wednesday, 10 May 2006
10.15 am

SUBJECTS: Budget 2006-07

HADLEY:

Treasurer Peter Costello handed down his eleventh Budget last night and he is on the line from Canberra to talk to me right now. Treasurer, good morning.

TREASURER:

Good morning Ray.

HADLEY:

Are you happy with the reaction?

TREASURER:

I think it has been pretty positive. We have put in place some structural changes which will improve income tax and of course we have got the biggest reform package for superannuation we have ever had and this will cut through the complexities and make superannuation attractive for millions of Australians. So I think that it is quite a positive reception to that.

HADLEY:

With our ageing population I think that is the most important part of the Budget. You have made retirement for over sixties more attractive. Is there self interest there somewhere?

TREASURER:

I'm not quite there yet Ray.

HADLEY:

No, no I am not suggesting you, Treasurer, I am suggesting someone else who is sixty or plus.

TREASURER:

Well look

HADLEY:

Is that the prompting he might have needed?

TREASURER:

Do not be provocative Ray do not. It is just too complex. I have been sitting down looking at these rules, you have pre '83 components, post '83 component, pre '94 component, post '94 component, reasonable benefit limit and it occurred to me how does anybody who is approaching retirement actually figure this out? And of course they do not. What they do is they go and see a financial adviser and I have just been thinking to myself how are we going to make sure this comprehensible? So what we are going to do is you will put your money into superannuation and it will managed by the fund and when you turn sixty you can have it tax free.

HADLEY:

Now that comes into effect am I right from 1 July next year?

TREASURER:

That is right.

HADLEY:

So people in the position of being close to that, or over it, what, they just hang on until July 1 and then they take advantage of it?

TREASURER:

Yes. You could still retire before then and you would retire under the current arrangement and you could then take advantage thereafter from 1 July but if you want to keep on working to 1 July you will get a much better deal if you are over sixty from 1 July of next year.

HADLEY:

Why the period of grace as opposed to introducing it 1 July this year as opposed to 2007?

TREASURER:

Yes that is a good point. There is a lot of transitional stuff here. Trouble with superannuation is it's a forty year thing and so there is a lot of technical transitional stuff that will have to be settled. I said to the industry we would give them until August to comment and we will legislate it after that, but I wanted to allow comment from the industry. They can always find people who might be disadvantaged one way or another, so let's just give ourselves a bit of time to find that out.

HADLEY:

Look the threshold lifting for 30 per cent, the 42 per cent becomes 40 per cent you have lifted it all but the one that has caused the most debate is the $150,000, the 47 per cent marginal tax rate down to 45 on a threshold now $150,000 I have heard commentators this morning say look, you are looking after the big end of town, those on over $100,000 or $150,000 you are not looking after the people middle income, so to speak, between the $50,000, $60,000 and $70,000. Your reaction to that please?

TREASURER:

We are cutting taxes for people in the $50,000, $60,000 and $70,000, we are cutting taxes because we are moving their thresholds too and they all have a tax cut. But my aim is too make sure as few Australians as possible have to pay that top marginal rate and after these changes, Ray, only 2 per cent of Australians will be affected by it and for 80 per cent of Australians their top rate will be 30 cents. Most Australians earn between $25,000 and $75,000 right through that period your top rate is 30 cents. You often hear people say well if I take overtime or shift work I go into a higher tax bracket but the truth of the matter is you will not go into a higher tax bracket if you are earning between $25,000 and $75,000 and most Australians are in the bracket.

HADLEY:

A couple of other things, and it was announced yesterday pre- empting your announcement last night the money on the Murray river now it might not be a vote getter, people do no think it effects everyone but I think it does and it is particularly important that we get the Murray back to what perhaps it used to be in some capacity.

TREASURER:

You are absolutely right here, this is Australia's most important river system. The Darling which comes out of Queensland, the Murray which is the boarder between NSW and Victoria it affects those two States. It is the water source for South Australia, for Adelaide if the water is completely polluted or dried up Adelaide loses its water supply, you have got irrigators that are coming off the Murray you have the Snowy Mountains scheme which is feeding into it. Fixing the MurrayDarling basin is fixing Australia's greatest environmental project and our greatest water resource and this is our greatest investment. This is long term visionary stuff, if we can get proper flows down the river, where irrigators are still protected, the red gums will come back, Adelaide will have its water supply and we will have fixed a huge environmental problem.

HADLEY:

Okay. You are spending a lot of money on the Hume between Melbourne and Sydney, not as much on the Sydney Pacific Highway route now as someone that travels more regularly north than I do south it is in a dreadful state the Pacific Highway but we will have a four lane highway between Sydney and Melbourne what in the next four or five years?

TREASURER:

By 2009. The plan is to have dual carriageway, there will still be three towns that will not have the full bypass but aside from those three towns dual carriageway all the way from Sydney to Melbourne and of course that is Australia's biggest freight route, Sydney to Melbourne our two biggest cities. As you said we are also bringing forward spending on the Pacific Highway. But of course the Pacific Highway is a joint New South Wales/Commonwealth road so our funding in that requires funding from New South Wales Government. We can not get too far in front of their allocations so we have made an allocation and that will bring forward important works on the Pacific Highway as well.

HADLEY:

In relation to being the Treasurer, eleven Budgets, are there any nerves attached to it going into it and as you hand down more Budgets do you become more confident that you have got it right in terms of what the reaction will be from the electorate and perhaps the commentators?

TREASURER:

Look, as time goes by you certainly got a much better feel for the economic effect of what you are doing. You just know how the economy runs and you know what you can do and what you can not do, there is no doubt about that, the work though gets bigger and bigger, the Budgets just get bigger and bigger and I look at the sums involved now, Australia this year, this financial year between 2006-2007 will have annual production of one trillion dollars. Now people are going to say my goodness what is a trillion? Well that is a 1,000 billion. You have to think about this, this is big stuff and they are just getting bigger and bigger and bigger as the economy grows, well that is good, but the amount of work and the detail and the effort grows all the time.

HADLEY:

I have got a call here from Doris she simply says, did pensions get anything Treasurer in the Budget last night? So Doris is like the rest of us she is into self interest, what did you do for Doris and other pensioners last?

TREASURER:

Yes we did. Doris would know if she is a pensioner that we introduced a utilities allowance it is worth about $100 a year in 2005 and that was to help pensioners with the rising costs of gas and electricity and water and last night I announced that there will be an additional payment of the utilities allowance, an additional payment of $102.80 between now and end of the financial year for age pensioners.

HADLEY:

So that will be a one off payment? They will get a cheque instead of it being deposited straight into their account.

TREASURER:

Yes.

HADLEY:

I know you are flat out this morning and I do appreciate your time and just one final word, so from July next year not this year if you are over 60 you are encouraging those people if they so desire to take superannuation and go fishing.

TREASURER:

To take superannuation tax free. What they do with their money is up to them. They can go fishing if they want to.

HADLEY:

And that is every Australian Treasurer?

TREASURER:

Over 60 (inaudible) superannuation rate. How old are you?

HADLEY:

No I am short of that. You have got to put up with me for another nine years before you pension me off.

TREASURER:

We are working on it Ray.

HADLEY:

There are people closer to you who are older than me.

TREASURER:

Well you keep reminding me.

HADLEY:

Yes. Okay I will let you go.

TREASURER:

It is good to be with you.