TOM ELLIOT:
Arthur Sinodinos is the Assistant Treasurer; he’s been good enough to join us now, Mr Sinodinos goods afternoon.
ARTHUR SINODINOS:
Hello Tom, great to be with you.
TOM ELLIOT:
Now poor old smokers, is it a case of beer and cigs up yet again?
ARTHUR SINODINOS:
Look, the reality is that some measures we decided we should keep on revenue grounds and the tobacco changes were one of those and the fact of the matter is there is a health case to also be made in this regard and Tony Abbott and other Members of the Government don’t resolve from that. But Tom there have been other measurers apart from that where we have decided to take the hit on revenue, because we thought there were good policy reasons why the measure should not proceed. And I’m thinking there of things like the self-education expenses cap of $2,000, which militates against people being able to educate themselves and become knowledge workers and the workers of the future that this economy needs…
TOM ELLIOT:
OK, I’d like to talk about that in just a moment, but if I could just go back to cigarettes. I mean I’ve seen some figures that would suggest if everybody who does smoke at the moment stopped smoking tomorrow, revenue wise it would be a disaster for the Government, is that true?
ARTHUR SINODINOS:
Look, I’m not sure how big a revenue disaster as you call it would be, but look if the outcome of that was that people were being healthier and living longer that would be a good outcome. And the fact of the matter is, we shouldn’t just look on smokers as a (inaudible) for revenue, we’re actually trying to discourage people from smoking for a whole variety of reasons.
TOM ELLIOT:
Sure, now what about the tax free threshold? One of the good things I thought Wayne Swan did was take the $6,000, or roughly $6,000 level off, you know the amount of income you earn without having to pay any tax and lifted it to around $18,000 and I know they were some tweaks for the welfare system and whatever that went with that. Are you going to leave the $18,000 threshold in place or does it now go back to $6,000?
ARTHUR SINODINOS:
He didn’t actually in reality shift it from $6,000 to $18,000, because we had a low income tax offset, which had the effect of lifting the tax free threshold quite a bit anyway, but we’re not looking to take away the tax free threshold as it exists now.
TOM ELLIOT:
So it stays at $18,000 or it stays at $6,000?
ARTHUR SINODINOS:
No no, it will stay at what it is now…
TOM ELLIOT:
And which is that? Because to be honest I’ve always been rather confused about this as to what it actually is, my understanding was that Wayne Swan lifted it, but I don’t know if it ever actually got lifted.
ARTHUR SINODINOS:
No no, it did get lifted…
TOM ELLIOT:
It did get lifted, so it will stay at $18,000?
ARTHUR SINODINOS:
Yeah.
TOM ELLIOT:
That is very good news, I had a number of questions about that via Twitter, by the way if you want to follow me on Twitter @tomelliot3aw. Another tax that was being proposed by the former Treasurer was people whose superannuation funds were able to pay them more than $100,000 a year, a so called super tax on high superannuation as it’s been proposed, is that going ahead?
ARTHUR SINODINOS:
No it’s not and we’ve had advice from Treasury that it’s actually a very difficult measure to implement and it would also capture people with less than $100,000 per annum in earnings in that pension phase of their superannuation. The funds themselves, the super funds, told us they would have to re-design their accounting and their IT systems to calculate the taxable earnings for each individual member, whether they are ultimately liable for the tax or not. Quite a bit of red tape to record each individual earnings to the Tax Office. Many individuals have more than one fund, so their earning would have to be aggregated to assess their potential liability. The treatment of capital gains was another complexity, so basically the Treasury were throwing their hands up and saying that the cost of the system redesign could range from $250,000 to $10 million per fund.
TOM ELLIOT:
From a more general perspective, I know it’s very common for new Governments when they come in to say: look we’ve had a look at the books everything is a lot worse than what we thought, as a result we’re not really responsible for all this bad news that comes out, whether its tax increases or spending cuts. I mean you along with the Treasurer, Joe Hockey, have had a good look at the books, are things as they were a few years ago or better or worse from a budgetary perspective?
ARTHUR SINODINOS:
Well what we’ve said is that since the election we had a chance to review the books and the Treasurer will have more to say about this when he releases the Mid-Year Economic and Fiscal Outlook, are worse than we thought. In part because revenue has deteriorated further, and he’ll have more to say on all of that, but when we were talking about the budget emergency before the election, let me be very clear about this Tom, what we meant was that if Labor kept spending the way they were spending and the drivers of spending they had in place and the sort of increases we were seeing in major areas of spending, we were on the road to really entrenching a very big budget deficit. And what we’re trying to do now is, in a whole range of areas, cut back the waste, have a Commission of Audit to give us savings over the medium term over the next 5 to 6 years. By the end of the decade we’re going to have to fund a $6, 7 to 8 billion increase in the National Disability Insurance Scheme and other things. So for us the budget emergency if you like, is stopping the drivers of spending growth from getting us in an unsustainable position towards the end of the decade as the population is aging and we’ve got less workers who pay tax.
TOM ELLIOT:
I mentioned before that the Treasurer wants to lift the Commonwealth debt ceiling from $300 billion to a whopping $500 billion dollars, did you actually think you’d need that $500 billion at any stage over the next few years.
ARTHUR SINODINOS:
He was taking out some insurance in the context where he’s been told by Treasury a couple of things. The first was that because the previous Government had not legislated an increase in the debt ceiling, given where their spending was driving the budget at the moment, we needed the ceiling to be at $400 to $450 and $500 billion, plus he was told that growth might dip in 2015 – 2016 as the resource investment comes off and as we wait for other sectors of the economy to pick up the slack. So he is giving himself wiggle room to be responsible in managing the economy over the short term as we put in place, as I said before those disciplines over spending, which give us the capacity to get the budget under control and constrain the growth in debt.
TOM ELLIOT:
Finally Mr Sinodinos, I would have thought one of the big issues is that it’s fine to borrow lots of money, whether you are an individual, a household, or indeed a government, when interest rates are ultra low, as they are now. Do you worry about what the Government might do, were interest rates to jump up at some stage soon?
ARTHUR SINODINOS:
Look that’s one of the reasons why you need to get the budget under control and do it sooner rather than later. Because you don’t want a situation where your interest costs keep going up and they eat into this spending, which would otherwise go on health, education and community services. As I said before, we need an extra $7 to $8 to $9 billion on the Nation Disability Insurance Scheme by the end of the decade. That’s the equivalent of the interests costs we are paying at the moment.
TOM ELLIOT:
And finally, finally and this will be my last question, I know the Commission of Audit has got to report on this, I know that it’s all too soon to say, but when do you think we’ll actually get back to a budget surplus? I mean will it be within a decade?
ARTHUR SINODINOS:
At least within a decade, that’s the commitment that Tony Abbott made, taking into account also increasing defence spending and looking at restoring things like the private health insurance rebate. But we want to do it sooner rather than later, we want to do it mate at a pace which is consistent with the economy continuing to grow.
TOM ELLIOT:
Arthur Sinodinos, Assistant Treasurer, thank you very much for your time.
ARTHUR SINODINOS:
Thanks very much Tom.