The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Chris Bowen

Chris Bowen

Minister for Financial Services, Superannuation and Corporate Law

9 June 2009 - 14 September 2010

Transcript of 11/05/2010

Interview with Michael Rowland

ABC2 News Breakfast

Tuesday, 11 May 2010

SUBJECTS: Budget, Tax Reforms

MICHAEL ROWLAND:

Financial Services Minister, Chris Bowen, joins us now from Canberra. Kevin Rudd has described today as critical for the Government's fortunes. Just how critical will they be?

CHRIS BOWEN:

Well, it's a critical Budget in terms of the nation's economic situation. That's how it's framed. It's a fiscally conservative Budget. It's a Budget which has the national interest first and foremost, and has our desire to make sure we build on our success through the global financial crisis as one of the world's best performing economies through one of the world's worst recessions, that we build on that, capitalise on that, and make sure that we're strong going forward.

ROWLAND:

The Fairfax papers are this morning reporting that the Budget will announce a return to surplus as early as 2012-13. Will that be the case?

BOWEN:

Well, I'm not going to confirm or deny what's in the Budget bottom line. But I will say this: we said at the height of the global financial crisis that the key to ensuring Government finances were sustainable in the long run was to stimulate the economy early. So to ensure that the deficit was lower in the long run, the best thing to do was to try to ensure that the downturn was more shallow in Australia and not as long lasting; that in the long run would see the Budget return to surplus earlier than it otherwise might.

The other point I would make is that the global financial crisis and its impacts are still around. You're still going to see quite a considerable impact on Government revenue through corporate tax and other taxes being lower than they otherwise would've been. The impact of the global financial crisis in terms of its impact on Government finances is still very much with us.

ROWLAND:

On that front, we can expect therefore the Federal Government to be marked down if there is any out of left field election year goodies announced tonight?

BOWEN:

We've made it very clear this is not, in our view, a typical election year Budget. It's a Budget with the national interest first and foremost. We don't think the nation can afford a giveaway budget of a John Howard-style spending spree, throwing money around. There will be measures there which go to assisting people who are in circumstances which we think require assistance, and there are certain changes in there but they're not framed in terms of being election giveaways. They're framed in terms of being sensible and fiscally responsible measures.

ROWLAND:

Minister, are you worried about the increasing chorus of criticism over the proposed super profits tax? Queensland and South Australian Labor figures are very strongly critical of what the government is doing.

BOWEN:

We always knew this was going to be controversial and a very rough ride in terms of the response of the mining sector and people associated with that, but we also think it's a fight very much worth having. It's in the national interest. At the moment, the mining tax system is inefficient and it's inequitable. It's also important to remember that the Resource Rent Tax is absolutely vital in funding things like reducing the tax on every company in Australia, on things like setting up Australians for a more comfortable retirement income, improving the average superannuation balance of somebody who's 30 today by the time they retire by $108,000. These things are inextricably linked; you can't have a debate about one without having a debate about the other. So we knew that would be difficult but we also knew it would be the important and right thing to do.

ROWLAND:

We learn that mining giant Xstrata has announced plans to put on hold a $30 million copper project in Queensland because of the uncertainty created by this tax. When will you come to a point of perhaps reviewing, if not so much the tax in its entirety, but the way you perhaps implement it?

BOWEN:

We said on the day this was announced, from the very first day, that there would be extensive consultation with the mining sector about implementation details. We announced a consultative panel. We announced a process to do that. This is not something we've done in a knee-jerk reaction. We did it upfront from the beginning. We're committed to that process. All we can do is say to the mining companies, ‘Come down, sit down with us and talk through your issues in terms of implementation'. And that's a very important process.

ROWLAND:

You're going to consult but you won't back away from that 40 per cent figure?

BOWEN:

We've set the 40 per cent figure as the appropriate figure, but there is a deal of detail about implementation that we're more than happy to talk through.

ROWLAND:

It's also true the Government can't afford another huge backflip if it decides to change any aspect of the mining tax, given the criticism heaped upon the Prime Minister in the opinion polls?

BOWEN:

Nobody is talking about backflips. We're talking about sensibly talking through the issues, and the implementation and operation of the tax. I think we'd be pretty roundly criticised, correctly, if we didn't do that.

ROWLAND:

Will you be imposing a super profits tax on the major banks?

BOWEN:

No.

ROWLAND:

Why not?

BOWEN:

The minerals of Australia are the property of the Australian people. When you come to tax mining operations, you have a different regime in place. That's always been the case. You've always had the royalties regime. We don't think that's an efficient or equitable way to do it, but there has always been a different regime when it comes to resources.

ROWLAND:

But the banks often have much bigger profits than the resources companies. Surely a tax on the banks, which aren't the most popular institutions in Australia, would surely be a vote winner?

BOWEN:

Well it may or may not be. But the fact of the matter is that Australia's banks were an important part of us getting through the global financial crisis in terms of our very strong prudential regulation. And we are making the point that the minerals of Australia are the property of all Australians, and the resources sector always has had a different tax regime to everybody else and it will continue to have a different tax regime than anybody else. What we're arguing about with the mining industry is just what that tax regime is, but I think everybody in the mining industry accepts that there must always be a different tax regime for mining because they are exploiting a non-renewable resource and that is something that no other sector does.

ROWLAND:

And finally, Minister, how quickly do you expect to see a bounce in the opinion polls for Government on the back of what you say will be a fiscally responsible Federal Budget?

BOWEN:

I don't think anybody should get carried away with an opinion on impact from this Budget. It's not designed to an election year giveaway Budget. You normally see a bounce from those sorts of Budgets. This is a very workmanlike, solid Budget which is fiscally conservative and responsible. Therefore, I think you will see a different dynamic. It hasn't been written with a view to any particular bounce in the opinion polls but with a view to how we ensure our strengths in the global financial crisis can be built upon and grown upon.

ROWLAND:

Chris Bowen, Financial Services Minister, thanks for your time this morning.

BOWEN:

Thanks, Michael.