JONATHAN GREEN:
Senator Arthur Sinodinos is the Assistant Treasurer and he joins you now. Senator welcome and thank you for speaking with RN drive.
ARTHUR SINODINOS:
Thanks, good to be with you.
JONATHAN GREEN:
Now one of your key promises was to cut back Government debt, get it under control, why are you getting rid of tax changes which might have brought you over $3 billion?
ARTHUR SINODINOS:
Look what’s been happening since we got in is we took advice from Treasury on as you mentioned the number of tax measures, which had been announced, but not enacted and we looked at them through the lens of revenue, red tape and compliance, ease of implementation, policy sense and we had to come to balance decisions around all this. Now it’s true that we could have said we’ll just allow everything to stand, doesn’t matter the merits of some individual measures, because they raise money, but in Government you have to be a bit more nuanced than that.
Yes you are right to say we have a budget imperative where we need to take action to reduce the growth in Government debt and get it down over time, that’s why we are having a commission of audit to try and do that in a more considered way, a more transparent way, with a report that will due by budget next year, it will be there for all to see and the results of that will be in the budget.
In the meantime we have to look at the advice we were getting from Treasury about why some of these measures have never been enacted until now and why some of these measures are probably either past their use by date or would actively be a problem to implement.
The tax on superannuation pension phase earnings above $100,000 per annum– we were told there were too many costs in actually implementing that: upfront costs for the superannuation funds, in some cases up to $10 million a fund, ongoing red tape. The funds would need to report each individual’s earnings to the ATO, adding to red tape and compliance costs. Individuals with more than one fund, their earnings would have to be aggregated to assess their potential liability, treatment of capital gains would add further complexity, so we had to make a decision about whether some of these measures could actually be implemented or if implemented at an acceptable cost in terms of collection and capacity to do the job that people said would need to be done.
JONATHAN GREEN:
Presumably though some of the revenue that was intended to be raised by some of these measures will have been factored into our current understanding of the budgetary position, I mean two things from that I am guessing in time you will be announcing measures to make up some of those shortfalls, but in the interim giving us some sort of sense of where the true picture now lies.
ARTHUR SINODINOS:
A couple of points Jonathan, the first is that the package we put out before the election, which had a bottom line of improving the budget by at least $6 billion and reducing debt by 16 billion. That is a package we will be implementing and we will start to implement with the Mid-Year Economic and Fiscal Outlook. So that will have an impact on the bottom line, as you are suggesting right, it’s important to understand that. Yes there has been some further deterioration in the budget bottom line since the election, Treasury say that revenue has been reduced further. The other dilemma we face is that growth is edging down, particularly in 2015 and 2016 as we transition from very high levels of resource investment and wait for other sources of growth to pick up the slack. What the Treasurer is concerned about there is how we support growth in that short period or short to medium term while putting in place the savings, which will garner that better budget bottom line over that medium term. Particularly towards the end of the decade, as we face increase costs for things like the National Disability Insurance Scheme, where we are going to have to shell out at least another $7 - 8 billion a year to get that up and running properly.
JONATHAN GREEN:
It’s probably not surprising Arthur Sinodinos that the Opposition Treasury spokesman Chris Bowen has been critical.
‘’Tony Abbott and Joe Hockey campaigned on the platform of reducing the budget deficit, since the election all they have done is blow the budget deficit.’’
I guess this is the point though, isn’t it Senator, it’s not so much the quantum of things that are being done or the fact that you are taking your time to get things in order. Before the election we were in a state of some crisis according to the politics coming from the Coalition, there was a budget emergency, can we really afford the sort of delay that you are now building into this process of recovering the money, of getting the budget back closer to the black.
ARTHUR SINODINOS:
We can afford a process of doing it properly. So we look at every aspect of Government expenditure, we will take considered decisions on that. We need until the budget to do that properly and as I said before, we also have to regard to the state of the economy where growth has been below trend, unemployment has been edging up. Look if we’re responsible for running the place we’ve got to be able to walk and chew gum at the same, we’ve got to be able to take the medium term actions, which will correct the budget situation, so it doesn’t get further out of control and at the same time we’ve got to have regard to the state of the economy.
If we came in and just cut everything to ribbons from day one everybody else out there would be criticising saying we’re just ideological blowhards and we’re not taking account of the economy in implementing our policies. We’re going to be more responsible than that, because we have to take the electorate with us.
JONATHAN GREEN:
The FBT changes around cars and the removing of the cap of self-education expenses, there is a sense that both of those can lead to a rorting of the taxes, is that not right?
ARTHUR SINODINOS:
In the case of the fringe benefits tax on cars, I think the previous Government underestimated, first of all the impact it would have on the car industry per say because of the salary sacrifice arrangements that were around…
JONATHAN GREEN:
So it’s all right for people to dodge tax as long as it helps the auto industry?
ARTHUR SINODINOS:
No no, my second point going to be there were integrity measures the previous Government itself had put in place, they weren’t actually cracking down on the industry because of rorts. They were actually changing the tax treatment they themselves had provided for the industry in terms of the concessionality of the tax provided you kept a log book and you could use a 20% rate in terms of a proportioning motor vehicle use between private and business and all this other stuff. So they were actually playing around with something they’d already done, this is what they used to do, it was the same with higher education. One year they were lording higher education, the next year they are cutting $2 billion dollars out of it. And self-education expenses, again, they were lording people getting out there trying to become knowledge workers and then they put a cap on that of $2,000, when 80% of the people claiming more than $2,000 a year had incomes below $80,000. These are people who are trying to improve themselves.
JONATHAN GREEN:
Senator, thanks for your time.
ARTHUR SINODINOS:
Great and by the way you’re a James Bond aficionado, is that right?
JONATHAN GREEN:
I am indeed.
ARTHUR SINODINOS:
As am I, I read all the books when I was young and I love the music and I have read some of your articles on that and I like them.
JONATHAN GREEN:
Well we’ve got a bit of Bond coming up in our final hour this evening so stay tuned Senator, stay tuned.
ARTHUR SINODINOS:
Thanks mate.
JONATHAN GREEN:
Senator Arthur Sinodinos, he’s the Assistant Treasurer and yes, Bond fan.