Patricia Karvelas:
For the government’s view, I want to bring in Assistant Productivity Minister Andrew Leigh. Welcome to the program.
Andrew Leigh:
Thanks Patricia, it’s an armada of Andrews you’ve got this afternoon.
Karvelas:
Oh look, doesn’t that speak volumes about politics, although I respect your right to be here. Yes, there’s a lot of Andrews in the parliament, but look that’s another audit for another day.
Has your decision to alter taxes and break election promises, clearly, backfired politically? I mean one poll today shows Angus Taylor as preferred Prime Minister next to Anthony Albanese.
Leigh:
Patricia, reform is hard but that doesn’t make it any less important. What we’ve done in this Budget is to make a series of tough changes around trusts, around negative gearing, around capital gains taxation, that experts like the Grattan Institute have been calling for for decades. And we’ve done it in the teeth of an international crisis not of our own making. The fifth big international crisis to hit Australia in a couple of decades.
I think that speaks volumes to the political courage of the Prime Minister and the Treasurer and the importance of continuing to reform despite the international circumstances coming at us.
Karvelas:
But do you see some of the backlash that we’re seeing in the polls as a consequence of breaking the promise?
Leigh:
Look, the important thing is that we’re doing work to get more Australians into a home of their own, and to make the tax system sustainable in the way that we can continue to deliver income tax relief, like the 5 income tax cuts we’ve delivered so far.
Karvelas:
But do you get why people get annoyed when politicians don’t stick to their word?
Leigh:
Look, you go back to those big tax changes in the 1980s and 1990s, and they were fought tooth and nail. Now –
Karvelas:
Bob Hawke didn’t break any of those promises though. He didn’t break promises if you look at that era. And when Keating did, there were consequences. So there’s always consequences if you break promises?
Leigh:
There are consequences if you do nothing, Patricia. I didn’t get into politics in order to simply defend the status quo. I got into politics in order to make the place fairer, and making the place fairer involves addressing things like the fact that 90 per cent of trust income at the moment comes to the top 10 per cent. The home‑ownership rate has been steadily falling, particularly among young Australians and if we don’t act on some of these intergenerational fairness questions, then the system just continues to get worse.
Karvelas:
Okay. A couple of other issues and then we’ll get back to some of this too. Jim Chalmers has ordered another 6 companies to divest their holdings in Northern Minerals as concerns are growing in, you know, your government in Canberra that Chinese‑backed investors are trying to seize control of this rare‑earths mining company. You keep needing to intervene here. Why?
Leigh:
Well this is about ensuring compliance with the foreign investment review scheme process. The Treasurer is the primary decision maker on that. I see fair few foreign investment review applications across my desk as the Assistant Minister for Treasury.
We welcome foreign investment but that has to operate within clear parameters. Australia has benefitted from foreign investment but every assessment above a certain threshold is scrutinised to make sure it’s in our national interest.
Karvelas:
The government hasn’t told us why you’ve taken this step. Why has this step been taken? Why is this not in – just explain why they have to divest.
Leigh:
We don’t go through the details of all of these cases Patricia, but rest assured that there is a strict national security lens applied. We’ve beefed up the resources available to the Foreign Investment Review Board to do that scrutiny. But at the same time the Investor Front Door is working with low‑risk investors to make sure we get more capital flowing where it’s needed to create more jobs and higher wages for Australians.
Karvelas:
Okay. I want to move to what is a death tax, right? Because the Opposition says that your new taxation arrangements for discretionary testamentary trusts – which we’ve all become experts in talking about suddenly, barely anyone probably knew what they were until the last couple of days – are a death tax. Now given they are a new taxation arrangement which happens upon somebody’s death – they’re right, aren’t they?
Leigh:
Patricia, as you say, 95 per cent of Australians aren’t receiving trust income and this is a set up that is used principally by those with the highest levels of wealth. What these arrangements say is that an existing discretionary testamentary trust won’t be affected and that a fixed testamentary trust can be set up and continue outside these arrangements. So we’re very clear this isn’t an inheritance tax of any form.
Karvelas:
It’s not an inheritance tax across the board, that’s absolutely right. But for this specific group it does operate in that way doesn’t it? And that’s the Coalition can seize on it and describe it that way?
Leigh:
Look, for the specific group that have a discretionary testamentary trust, then their affairs will continue going forward. Same with charitable trusts, same with disability trusts, same with farm trusts. They’re carved out for these arrangements for good reasons.
But you do have some arrangements in which discretionary trusts are being used in order to avoid tax – to minimise tax I should say – and that’s why we’re cracking down on these arrangements. But we’re giving a longer than usual time for trustees to adjust in order to make sure the system beds down comfortably. The scare campaigns are not a surprise to me, Patricia.
Karvelas:
No, but –
Leigh:
Every time you do reform you get these sort of scare campaigns, but the –
Karvelas:
Yeah, but how many people worry? They think, ‘Well they’ve done it there, maybe they’ll go further’. Isn’t that a vulnerability for Labor, particularly given the history?
Leigh:
Not in the least. We have consistently ruled out inheritance taxes. I was asked about this in past elections where the Coalition was running the same tired old fear campaigns. When they can’t think of any reasonable intellectual arguments to make, they fall back on the inheritance tax scare campaign. And if you were spooked off by that then you wouldn’t do the kind of serious reform that young Australians have been crying out for, and which is necessary in order to deliver things like the Working Australians Tax Offset, the instant asset write‑off for small business, the research and development tax credit changes – all of which help to make us a more dynamic and competitive economy.
Karvelas:
You talk about young Australians. This rent‑vesting arrangement that some young Australians do, you know, the government concedes there are people who do that. Where they buy a property somewhere they don’t want, negatively gear it and then they actually rent somewhere else where it’s close to their job. The Treasurer yesterday said that actually only 7,500 people actually do this, therefore it’s statistically insignificant. That’s not that different to the number of people you want to get owning homes as a result of your changes to taxation. So why is it statistically insignificant for that but not for your overall changes?
Leigh:
Well the Budget projects that 75,000 new homes will be as a result of these changes.
Karvelas:
Over 10 years, so if you do the maths it’s not many thousands a year right, it’s the same?
Leigh:
Well, that’s on top of all of our other changes in housing supply and particularly the work that Clare O’Neil’s doing with states and territories around regulation. The 1.2 million home target is an ambitious but achievable target. And if you look at under 35s, 19 out of 20 don’t have rental income and 9 out of 10 don’t have share income. So we are making changes that are fundamentally in the interests of young Australians.
It’s not just them though, Patricia that come up to me at street stalls and town hall meetings to talk about home ownership. It’s their parents and grandparents. They say the system can’t continue as it is, it’s just not fair on the next generation.
Karvelas:
But on the question of the numbers, 7,500 versus what we’re going to see over 10 years, which is 75,000 dwellings of homes. Is that statistically insignificant too, that 75,000?
Leigh:
It’s a smaller portion of the total amount that we’re building, I mean 75,000 compared to the 1.2 million home target. But every home is important and that’s why you’ll see more and more Labor MPs standing with these new developments that the Housing Australia Future Fund is investing in.
There’s a terrific one in my electorate just down from the Belconnen owl, which may be a landmark that non‑Canberrans will recognise. That’s going to see 315 new dwellings being built close to public transport, close to Lake Ginninderra – a really important investment for those who’ll be moving in.
Karvelas:
So paint me a picture. Do you see the next 6 months as being a very difficult one for the government given you’ve just delivered a budget that doesn’t appear to be overwhelmingly popular?
Leigh:
Reform takes time, reform requires consultation. We’re going to do that consultation in the usual course of things. But I want to be part of an ambitious government. The R&D report was called ‘Ambitious Australia’ and we’re delivering on that, the ambition to improve housing affordability.
This abundance agenda means we work to bring down the cost of producing power through a renewables revolution, a move to getting more homes, we’ve seen a big uptake in electrical vehicles which is reducing our reliance on overseas oil. All of that is about increasing the scope of what’s possible, not only for young Australians but for all Australians. We need a more dynamic and competitive economy and our competition reforms are helping to deliver that. And it’s all about the end goal of raising living standards and wages for Australians.
Karvelas:
Do you think there needs to be further work done to change the tax composition so that wage earners get more of their money back?
Leigh:
The aim of these reforms is to put us in a position where we can continue to deliver those income tax cuts, Patricia. What we’ve said through these changes is that as fiscal room allows, we want to continue delivering income tax cuts because we understand how important that it is for Australians. But it’s got to be affordable and you’ve got to say where the money’s coming from.
What we saw last Thursday night from Angus Taylor was effectively a huge, big cut to public services disguised as an indexing of the tax brackets.
Karvelas:
We are out of time but I’m very happy you got to sit with me at the desk, thank you for coming.
Leigh:
It’s a real pleasure, thanks Patricia.
Karvelas:
And that was the Assistant Productivity Minister Andrew Leigh on the reaction to the federal Budget and polling out over the weekend.