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

11 May 2008

Interview with Laurie Oakes

Sunday Program
Channel Nine

11 May 2008

SUBJECTS: Paid Maternity Leave; Budget; Review of the Tax System; Luxury Car Tax

OAKES:

Mr Swan, welcome to Sunday.

TREASURER:

Good morning, Laurie. It's great to be here.

OAKES:

Natasha Stott Despoja says that on Mother's Day the Government should give mothers a paid maternity leave scheme. Have you got any good news for mothers today?

TREASURER:

Well, I've got some good news for my mother-in-law and my wife. That is, I've sent them some flowers this morning so I hope they've arrived. But it's an important thing to talk about on Mother's Day. We have given a reference to the Productivity Commission to investigate paid maternity leave. They will report next year. We think the balance between work and family is critical. It's important to the economic health of the nation, as it is to the social health of families. So, we're having a hard look at paid maternity leave and we will receive that report next year and give it due consideration.

OAKES:

Okay. Well, there are a couple of well-placed Budget leaks in the papers this morning. We read, for example, that Tuesday night's Budget will provide $2.3 billion to counter climate change. How central is climate change to your Budget?

TREASURER:

Our whole Budget is central to delivering our election commitments, and nothing was more central to the election campaign than climate change. So, this Budget will deliver on all of those commitments in climate change that we gave during the last election campaign. Climate change is critical to the long-term economic health of the country. And to make environmental sustainability work, we need to commence now. It's going to be a long process.

OAKES:

Well, the other leak is that you're going to whack up the tax on luxury cars from 25 per cent to 33 per cent. What's the rationale there?

TREASURER:

Well, Laurie, we've got a very big savings exercise to go through in this Budget because, as you revealed earlier in the week, the previous government spent unsustainably. We've got to rein in that reckless spending to put downward pressure on inflation and therefore, downward pressure on interest rates. This is one measure that will be announced on Budget night. That's part of that savings exercise. We don't think it's unreasonable that people who've done well in recent years, particularly from government decisions in terms of top end tax cuts, just pay a little more for a luxury car. What we're dealing with here is perhaps about 10 per cent of cars, most of them are imported, and say, for an S-type Jaguar, it's about $2600 additional. So, we think it's only fair that these people who can afford these cars make a small contribution to that savings effort.

OAKES:

Alright. I want to come back to the soaking the rich in the Budget in a second. But I also understand that a centrepiece of the Budget will be the announcement of details of a comprehensive inquiry into the tax system, as suggested at the 2020 Summit. Can you tell us about that?

TREASURER:

Yes, most certainly, Laurie. We think a modern economy needs a modern tax system, particularly given our situation in the world. A modern tax system needs to be efficient. It needs to be internationally competitive. It certainly also needs to be fair. It needs to ensure that everybody pays their fair share, and it needs to be simpler. We think now is the right time to comprehensively review our tax system. There hasn't been a complete review of our tax system in many years. And we will look at everything. We'll look at personal taxation. We'll look at the transfer payment system. We'll look at how that affects individuals, how is affects families, how it affects retirees. We'll look at the company tax system, and we'll also look at all of the implications, say, of an emissions trading system for taxation as well. So, it will be a comprehensive review of the tax system.

OAKES:

Who'll do it?

TREASURER:

It will be carried out by Dr Ken Henry. He will be assisted by Professor John Piggott from the University of New South Wales, Heather Ridout from the Australian Industry Group, Mr Greg Smith, who has been a previous officer in the Tax Department, and Mr Jeff Harmer from the Families Department.

OAKES:

Now, to get this straight, this is federal and state and local government taxes, the whole lot?

TREASURER:

Federal, local government taxes and state government taxes – a comprehensive review of the relationship between all of those.

OAKES:

What about the GST?

TREASURER:

Laurie, when it comes to the GST, we have ruled out any broadening of that base of the GST or any increase in the GST rate.

OAKES:

What about the tax arrangements on super?

TREASURER:

Yes, we've ruled out any change to tax-free super as well. But we do think there's a lot we can do to comprehensively look at all of the relationships between the various forms of taxation because the nature of the tax system affects economic prosperity in the country. I'd also like to make the point that our objective is to keep taxes as low as possible but consistent with the delivery of quality public services.

OAKES:

How long will the review take? When do you expect the final report?

TREASURER:

The review will take probably through to the end of next year. It's a comprehensive review, but it's one we want to put in place and produce results as soon as we can.

OAKES:

So, does that mean you'll go to the 2010 election with proposals for a revamp of the tax system?

TREASURER:

Well certainly we will go to that election with a comprehensive set of proposals. I can't predict what the review might say. The review may say that in some aspects we are doing well, but it may also make substantial recommendations for change. But we think it's important and very timely to look at the whole of the tax system, particularly given where we are in the world, and particularly given international competitiveness reasons.

OAKES:

Well, we've seen the ‘soak the rich' headings about the Budget. Some people are sort of starring you as Robin Hood, although maybe it's Kevin Rudd who's Robin Hood and you're Little John.

TREASURER:

Well, I wouldn't characterise it that way at all. We've got a very substantial savings exercise to go through. It's very important that everyone in the community makes some sort of contribution to that savings exercise. But what we've said very clearly is our aim is to protect working families. Working families are doing it really tough. We've had something like eight interest rate rises in a row and we've got inflationary pressures in the economy. The central feature of this Government will be to deliver to working families who are doing it tough, and also to make sure that when we make those savings, we make them in a way which doesn't unduly hurt those people who are in that situation.

OAKES:

But are you saying that working families, everybody will have to share the pain?

TREASURER:

What I'm saying is we have been very determined to deliver our tax cuts to working families and it seems to us that when we're making our savings, some people who have done very well in recent years can afford to make a contribution to that savings effort. So, that's why we've taken the measure on the luxury sales tax.

OAKES:

Well, how serious are you about reducing middle class, upper class welfare? How much means testing are we going to see?

TREASURER:

That will be revealed on Budget night. I can't speculate one way or the other, Laurie.

OAKES:

You wouldn't be speculating, you know.

TREASURER:

Well, of course I do. But the most important thing about our savings package on Budget night will be that it protects working families and what it will do is put in place the economic settings which can put downward pressure on inflation and therefore, downward pressure on interest rates.

OAKES:

We already know you're going to means test Family Tax Benefit Part B – you've said that – and the baby bonus is pretty obvious – Kevin Rudd's virtually confirmed that …

TREASURER:

I'm not buying into measures before the night, Laurie. You'll have to wait until Tuesday night.

OAKES:

Well, the Opposition has targeted you over this. Are you worried that you could lose support by taking benefits away from people?

TREASURER:

I'm not worried about electoral support. What I'm worried about is the long term national interest, the long term economic interests of this country, getting the settings right. And if we don't deal with tackling inflation, then we will have permanently higher inflation and permanently higher interest rates. And what that does is erode the living standards of working families. We've got to get the balance right in this Budget – tackling inflation, protecting working families, and making the room for the investments for the future, particularly in education, particularly in health and particularly in infrastructure.

OAKES:

You've said you wouldn't characterise this as a Robin Hood Budget. So, what sort of headline would you be hoping for next Wednesday morning?

TREASURER:

I'll be hoping for a headline that says we will deliver a strong economy and we will deliver for working families.

OAKES:

So, I suppose what I really want to know is are you going to have a huge deficit? Are you going to outdo Peter Costello in socking away a massive deficit?

TREASURER:

The whole importance of the savings exercise in tackling inflation is to build a strong surplus, a strong surplus which can be a buffer against international uncertainty and a strong surplus which provides the capacity to invest in the future and a strong surplus which reduces public demand at this time so we can bring down inflation.

OAKES:

Everyone seems to think it will be at least $20 billion, probably more. Is that in the ballpark?

TREASURER:

I'm not buying into quantums on the program today. That will be revealed on the night. But it will be a responsible surplus which will deliver those objectives that I was talking about before.

OAKES:

And will you be tipping the surplus into the proposed new Building Australia Fund?

TREASURER:

We'll be using the surplus responsibly, Laurie. That's what we'll be doing. We've already said that we will establish Infrastructure Australia and that we will have a Building Australia Fund, and we will outline how we propose to proceed from there on Budget night.

OAKES:

There's speculation at the weekend, though, that you'll put the whole surplus into that Fund, you won't confirm that?

TREASURER:

No, I won't confirm that. That doesn't mean a yay or a nay, Laurie.

OAKES:

You've said the Budget will lift the threshold at which the Medicare levy kicks in for people who are not privately insured. Now, the health insurance industry, the Opposition, are adamant that that will make fewer people take out private health insurance.

TREASURER:

That situation has been very unfair. Up to two million Australians have been caught in a tax trap. When that was originally introduced it was supposed to be a surcharge on high income earners. And the previous government simply did not adjust those thresholds. All we have done is adjust those thresholds. We think the decision that we have taken is fair. We are supporters of private health insurance and the private health insurance industry, yesterday, said that they didn't necessarily agree it would produce some of the dire circumstances that were predicted yesterday by others.

OAKES:

The Australian Health Insurance Association said it would result in 400,000 people giving up private health insurance.

TREASURER:

I would've thought the private health insurance industry would have had more faith in their product, Laurie.

OAKES:

But if that happens, that puts more pressure on public hospitals. There's a theory that was put to me yesterday that the Federal Government, in fact, would save money out of this by cost-shifting to the hospital system because they'll have to pay out less in the private health insurance rebate. Will you save money?

TREASURER:

Laurie, you'll have to wait to see the figures on Budget night. But I would make this point. We have a very substantial package of measures to invest in public health in this Budget. It is a very, very high priority for the Government.

OAKES:

But is this, in fact, a savings measure?

TREASURER:

It's not directed as a savings measure at all. What it is directed at is giving some justice to those people who've been flogged by a surcharge which can't be justified by the circumstances.

OAKES:

How concerned are you about unemployment rising? You've conceded now, I think, that unemployment is going to rise. How badly and how much of a contribution will the Budget make?

TREASURER:

Laurie, what I've said is that we have had eight interest rate rises in a row and we've had an international economic slowdown. That will mean the Australian economy will slow and certainly that will have an impact on jobs. But our objective is to get the balance right in this Budget so we can have sustainable growth and sustainable job creation well into the future. You can't have that if you have permanently high inflation.

OAKES:

The Opposition says that if you have a tough Budget on top of that, you'll drive Australians out of jobs.

TREASURER:

What we'll have, Laurie, is a responsible Budget which will put in place the settings to create jobs well into the future. You won't have that if you follow the advice of the Opposition and have no savings and no responsible economic policies.

OAKES:

This Budget probably marks the real start to the Rudd Government. It's the end of all the symbolic announcements and suddenly you've got to make tough decisions that will affect people directly. What do you think will be the result? Is it politically smart or is it dangerous?

TREASURER:

What we are going to do is what is economically right for the country, not what's politically smart, Laurie. What is economically right for the country is to tackle the inflation challenge, to deliver for working families and to put in place the investments for the future.

OAKES:

Are you nervous?

TREASURER:

I'm really looking forward to it, Laurie, because this is the opportunity to make a very, very big difference.

OAKES:

Treasurer, we thank you.

TREASURER:

Thank you.