The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

26 April 2008

Doorstop Interview at Nundah Shopping Village

Brisbane

26 April 2008

SUBJECTS: Tax Cuts, Childcare Rebate, Inflation, Interest Rate

TREASURER:

Well, the Government’s tax and childcare relief will be delivered on July 1 as promised. 

This relief will be directed towards working families who are struggling with the rising costs of living, and that’s why it’s so important.  In particular, this tax and childcare relief will be of significant benefit to working mums who will receive a significant increase in take home pay as a result of this tax and child care relief.

If you’re a working mum working two days a week with two children in childcare there could be relief of up to $71 a week.  If you’re a mum working five days a week with two children in childcare, relief of up to $136 per week. 

What’s been happening in the past is that when working mums have gone back to work or worked additional hours, they’ve received virtually nothing in the hand.

These modern changes will reward the hard work of those mums who work a few more hours to pay the bills.

So, these changes will be delivered in full as promised.

The Rudd Government takes its promises and commitments to working families very seriously and that’s why these policies will be delivered on July 1.

JOURNALIST:

Is this a commitment you’ve made before?

TREASURER:

It is a commitment we’ve made before but what we’re putting out there is the Treasury modelling that shows the very significant take-home pay benefits to working families and in particular working mums.

JOURNALIST:

Is this an acknowledgement that families really are hurting?

TREASURER:

There’s no doubt that working families are under tremendous financial pressure – rising costs of food, rising costs of petrol.  That’s why we have been absolutely adamant that these tax changes and childcare relief will be delivered in full.

We’ve had plenty of advice from others that the Government should not deliver these tax changes and this childcare relief.  We are adamant that the working families of Australia have earned this relief and we will deliver this relief on July 1.

It’s been their hard work that has made our economy strong and this relief is deserved, and in particular working mums deserve some incentive.  It’s not good enough when a working mum goes back to work or works a few additional hours that she does not receive in her hand, additional money.  It’s taken away with increased childcare costs, taken away with tax.

What we’re going to deliver is a modern system that recognises the reality for working mums who go back to work or work additional hours.  We are going to reward their efforts. 

JOURNALIST:

Is this a diversional act from all the bad news that’s happening financially?

TREASURER:

No, it’s not a diversion.  It’s a recognition of all the hard work of Australian families who deserve some tax and childcare relief.  We’re going to deliver that tax and childcare relief on July 1.  It’s been earned by the Australian people and it will be delivered. 

JOURNALIST:

What about the latest thing for families – two banks putting up their interest rates in a couple of days outside the RBA’s decision – one on a public holiday?

TREASURER:

One of them made their announcement on Anzac Day.  I think that was a lousy thing to do.  It’s one of the reasons we put our bank switching package out there.  I think customers will reward those banks that best protect them in this environment.  That’s why we put the bank switching package out there.

JOURNALIST:

Of all days, Anzac Day.  It’s a day for Australians (inaudible) and walk down the road and establish a new account. 

TREASURER:

As I said before - it’s a lousy thing to do.

JOURNALIST:

What do you think of the NAB for doing that?

TREASURER:

Well, I just said it’s a lousy thing to do, a lousy thing to do.

JOURNALIST:

They’re saying they had to do it because of costs but what do you think of them continuing to raise rates beyond the RBA?

TREASURER:

Well, what we’ve got to do is have a look at what’s been going on because the fall-out from the US sub-prime crisis is extremely serious.  There’s a melt down in international financial markets which is increasing the costs of borrowing, putting a lot of pressure on the financial system, both internationally and in this country.  But what we have to do is to make sure that our banking system is as competitive and as open as possible.  That’s why the Government moved earlier this year to put in place its bank switching package.  When banks do increase their rates outside the RBA’s cash cycle, they ought to go out and front up and explain it to the Australian people.

What I can do is say to the Australian people, ‘If you don’t like them, shift your account’.  And what I’m trying to do is to make it as easy as is possible for people to switch their accounts.

JOURNALIST:

A couple of the banks now admit that their interest rates of 9.46, (inaudible).  Is it a strange coincidence, do you think, for them to be hit equally hard by the credit crunch?

TREASURER:

Well the credit crunch has been going on since last August.  The banks started moving their rates last August, well before even the last election.  We do have to recognize there is an international credit crunch which is causing an enormous amount of dislocation in the financial system around the world.  But what we want to make sure is that no bank takes advantage of that situation.  That’s why we’ve put our bank switching package out there so that customers that don’t like what their bank’s up to, vote with their feet and go somewhere else.

JOURNALIST:

Bernie Fraser’s calling for a review of the two to three per cent inflation targeting zone.  Do you think that’s the correct thing to do? 

TREASURER:

No, what I think we have to do is to tackle inflation because higher inflation means higher interest rates – higher inflation does bring higher interest rates.  That’s why we’ve had eight official interest rate rises over the last three years.  The Government will tackle inflation in this Budget because that’s the only way we can put some relief in the system in the long term to put downward pressure on inflation and downward pressure on interest rates.

Australians are struggling with high interest rates at the moment because we’ve got high inflation.  What the Government says is we have to deal with the causes of that problem.  The Government also says we recognise the impact of the cost of living on Australian families – which is why we are so serious about delivering our tax relief and our childcare relief – to recognise the fact that working families are really struggling in the current environment in making ends meet.

JOURNALIST:

Do you think (inaudible) right raising the interest rates to really hit inflation when some of the driving factors behind that are food and fuel and living expenses?

TREASURER:

We have a range of cost pressures in the system but underlying inflation hit a record high yet again in the March quarter of this year.  As a country we must deal with that inflation if we are to deal with interest rates.  Not to deal with inflation would mean higher interest rates for longer.  Dealing with inflation will put downward pressure on interest rates more immediately, and that’s what we have to do.

JOURNALIST:

Do you think when it comes to interest rate rises that the cure can eventually become worse than the problem?

TREASURER:

There’s nothing worse in a community or a country than high inflation.  It erodes confidence.  It attacks living standards.  It erodes savings.  Permanently high inflation is not a very attractive proposition for any country in the world.  If we want to grow sustainably, create jobs and create wealth we have to deal with high inflation.  Unfortunately, inflation has been building for a long time.  It was left unattended by the previous government.  We accepted from day one the responsibility for dealing with inflation, and deal with it we will. But we also recognise that working families are doing it really tough at the moment because inflation does impact on their cost of living.  That’s why we are so committed to this tax relief, to the childcare relief and to modernising our tax and childcare system so that we can recognise the financial pressures that are on Australian families.

JOURNALIST:

All these economic pressures – is there light at the end of the tunnel?

TREASURER:

Australia is the best place of any country in the world to deal with the forces that are out there at the moment – international forces which are pushing up the costs of money, international forces that are occurring in the United States and slowing the world economy.  On the other hand, Australia is well placed to deal with all of those, but to deal with them successfully in the long term we do have to deal with inflation but we also have to modernise our economy at home. 

These tax and childcare changes are part and parcel of producing a modern system that recognises particularly how important working women are to our workforce and to our long term economic health.

Once you recognise that you do need to put in place a modern tax and childcare system that provides the support for those working women who’ve done so much to make our economy strong in recent times and who have made a very significant sacrifice.  The struggle between work on the one hand and family on the other is one that many women find very difficult to juggle.

The least we can do is to create a tax and childcare system that rewards their effort, not punishes them.

JOURNALIST:

Apart from some of the incentives coming in the Federal Budget and your work on the tax scheme and for mothers, when do think Australians might see a break as far as rising interest rates?

TREASURER:

Well what we have to do is deal with rising inflation and when you deal with rising inflation you ultimately have an impact on interest rates.

In the past, the previous government left all the work to the Reserve Bank.  That’s why we had eight interest rate rises in only three years.  What we say is we must use the Budget to get rid of reckless spending that the previous government engaged in, to modernise our tax and welfare system and to also put in place the investments for the future that will make our economy strong in the long term, such as investing in skills and education and investing in infrastructure.

JOURNALIST:

Now the States are working on their Budgets also. What would you encourage them to do now that you’re going through it yourself?

TREASURER:

Well I’d encourage them to do all of those things that are very important – get the fundamentals right, get the investment in place so we can lift our productivity over the long term.