GARETH PARKER:
Treasurer, good morning.
TREASURER:
G'day Gaz.
PARKER:
Why are you cutting taxes when the Budget is in deficit, and net debt is around $350 billion?
TREASURER:
Well a couple of reasons, one: it's their money, it's not ours, and we think Australians should keep more of what they earn. They earned it, this isn't costing the Government money, it's actually letting people who earned the money keep it. Second point is, the cost of these measures actually starts hitting the Budget when the Budget is back in balance. And thirdly, when it comes to debt, net debt is actually peaking this year. Over the Budget and forward estimates, that net debt will fall by $30 billion and over the ten year period, it will fall by over $230 billion. So we are reducing debt, we are keeping taxes low, we are bringing the Budget back into balance. We're ticking all of these boxes, because that's how you run a good Budget and strong economy.
PARKER:
Do you think that people would prefer a $10 a week tax cut this year, or for you to fix the Budget, bring it back into surplus, and start paying down the debt?
TREASURER:
Well I'm not going to dismiss a family who, on middle incomes, two income earners, who would benefit by $1,000 from this — having half of their annual electricity bill being paid for. I don't think that's trivial, I think that's actually quite meaningful for a family.
PARKER:
I'm not saying it's trivial, I'm just asking you about priorities. Is budget repair now jettisoned?
TREASURER:
The priority, right now, is to ensure that Australians, who have been doing it tough for many years, also share in the benefits of a strengthening economy. And we are bringing the Budget back into balance. We are achieving over 1 per cent of GDP surpluses over the medium term, consistent with our strategy. I mean the Budget numbers that I announced last night are stronger than what they were six months ago, and stronger than what they were twelve months ago. So we are doing all of these things. I am not having to choose between them, because we're delivering all of them.
PARKER:
Or is the priority to get yourself a boost in the polls, perhaps be in a position to call an early election or at least an election that's due next year?
TREASURER:
Oh, look I think that's just playing politics with it Gareth. What we're doing is ensuring that Australians get more reward for the effort they're putting in. I mean, that's what it is. Others can call it what they like but I know what I'm doing, I'm delivering that tax relief to Australians who need it. It matters a lot to them and they've worked hard for it.
PARKER:
Treasurer, what…
TREASURER:
And I don't think allowing taxes to rise above what I consider reasonable levels is a sensible way to try and balance the Budget over the longer term. I mean, the suggestion — and I don't think that you're necessarily putting this — but I know some others are, is apparently we should be taxing Australians more and higher, to collect more money from people.
PARKER:
Well no, I'm certainly not making that argument.
TREASURER:
Well I know, but the Labor Party…
PARKER:
I'm just wondering what's changed, because a year ago you said that any windfall gains in revenue would be diverted to Budget repair. Now, there's a little bit that goes to Budget repair but most of it goes to income tax cuts. No one begrudges an income tax cut, I'm just wondering, again, about priorities.
TREASURER:
Well again, Gareth, I mean look at the details of the Budget. What it shows is that in 2017-18, in 2018-19, and 2019-20, pretty much all of the tax revenue gains that have occurred in those years, pretty much all of them, go straight to the bottom line. And the reason for that is the cost of the tax package doesn't start kicking in until 2019-20 and beyond. Now what happens in those earlier years is there has been an improvement in the very short term on company tax revenues which is a function of the movements in commodity prices. Now we haven't built the tax cuts based on that. I mean, that all has gone straight to the bottom line. But the longer term position of the economy strengthening and more people getting out of welfare and getting into work, that's what underpins this Budget: people getting jobs.
PARKER:
There's three phases to your tax plan and it takes seven years to kick in. Twelve months ago you said you needed to increase taxes via the Medicare levy. In just twelve months, as you've just described, the economy has turned around to such an extent you are now talking about cutting taxes. How can anyone have any confidence in financial forecasts based on things like commodity prices, when you're building in assumptions over such a long period of time? It's a bit of a fantasy isn't it?
TREASURER:
Well what you're pointing out there is that we were conservative in our forecasts last year. We're conservative in our forecasts this year and that means the surprise comes on the upside, not on the downside. That sounds to me like a very sensible thing to do. I mean if we'd predicted more revenue last year and got it wrong and spent money based on that. That's what the Labor Party used to do. I mean Swannie locked in commodity prices at over $150 bucks a tonne.
PARKER:
Well he also projected future surpluses that never materialised…
TREASURER:
That never happened! Exactly.
PARKER:
Which is what you're doing.
TREASURER:
No. I'm not doing what Wayne Swan did, because my forecasts, and if you go around all the key economists today, they're all calling it as being bang in the sweet spot. I mean our forecasts on the economy are more cautious than the Reserve Bank of Australia, of the International Monetary Fund. I mean it has been received, a claim in terms of its conservative nature from economists all around the country. So no we don't forecast like Swannie. We don't spend money that we don't have and when things improve as they have over the past year, then we think that's a good thing and we think people should be able to keep their own money and where those things occur, that should be the priority.
PARKER:
Right.
TREASURER:
And not having to keep taxes too high.
PARKER:
Treasurer Scott Morrison, he joins me on the line. He handed down his Budget last night, his third one. Can I ask you about one feature of the future structure of the tax system that you've just introduced a Bill into Parliament to try and legislate?
TREASURER:
Yep
PARKER:
You're effectively going to do away with one of our tax brackets all together. There's going to be one tax bracket that applies for people earning their $40,000th dollar, right through until their $200,000th dollar.
TREASURER:
Yep
PARKER:
That's pretty much a flat tax rate for what, 94 per cent of tax payers? That's a big change in philosophy in how tax system has traditionally dealt with progressive income scales. Is that fair?
TREASURER:
Well of course it's fair. I mean you actually have a higher proportion of people just slightly on the top tax bracket under that system then you do now. But for the vast majority of working Australians, you're right. They won't face bracket creep again and I think that's a good thing. The more you earn obviously the more tax you pay and what I think is pretty interesting is that the Australians who are on the top two tax brackets, they're less than a quarter of Australians and they pay two thirds of the tax bill. Now that's a pretty heavy burden for them to carry. Now, we will still have a very progressive tax system, I don't think that's injured at all in this process. But it's also saying that for the vast majority of Australians over their working life, if you work more hours, if you get extra shifts, if you do overtime, if you get a pay rise, if you get a promotion, if your small business that you run does well. Well you won't be punished with higher taxes for your efforts.
PARKER:
Ok, you've got to go, but I've got to, I can let you go without asking you this. The Budget is now out of the way. Productivity Commission report due any day now, when are we going to see a solution to the GST?
TREASURER:
Well I've always said the back marker on that is the next election. But we'll work through the report when it comes to us. AS I've said, you would have seen in the West Australian earlier this week I made it pretty clear that we remain committing to fixing this, not papering over it, but fixing it. But we'll continue to work methodically through this. I've been very upfront with Western Australians about this. I know there's a problem and I intend to fix it. But the Labor Party doesn't think there's a problem, they want to sort of keep applying the band aid. That's not what we're going to do and so we'll just keep working the problem and we'll look to find a solution.
PARKER:
Any chance of a solution will be outlined before the Perth by-election?
TREASURER:
I think that's highly unlikely, because we only, we don't get the report until mid this month and I think there will be a lot more work to do between then and being able to finalise a solution, so we're going to continue to work patiently on this. But we know there's a problem and we intend to fix it.
PARKER:
Thanks Treasurer.
TREASURER:
Thanks a lot Gareth.