SUBJECTS: Budget 2010-11, superannuation, Resources Super Profits Tax
SCOTT LEVI:
The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, joins us on the line. Good to have you with us.
CHRIS BOWEN:
Good morning. Good to be with you.
LEVI:
It was interesting to see those figures and a lot of it coincided with the stimulus, the Government stimulus, and it was quite a substantial sum of money, Mr Bowen, wasn't it?
BOWEN:
It was, and it was necessary at the time to see Australia through. Of course, the rest of the world went into recession and we avoided it. We had the view at the time that if we could stimulate the economy, get money into the economy, then that would – as well as being the right thing to do keep unemployment as low as we could, which is what occurred – would also be the best way of keeping the Budget deficit as low as possible for as long as possible because if you had a long, sustained downturn or a recession, it takes a very long time for the Government's finances to recover.
But by stimulating the economy early, and very decisively, we've managed now to be in the situation where we are going to return to surplus three years early and the first country, first major advanced developed economy to do so in the world. It's a pretty good achievement not only for the Government, but of course for the entire nation, which we can all take some pride in.
LEVI:
Did the mining boom feeding China have anything to do with us keeping our heads above water?
BOWEN:
There are a number of factors. Of course, our links with China were one of them. The commodity prices were one of them. The commodity prices took a down turn, but nevertheless that sector has been important. But, of course, the strength of our banks, our financial regulation, the stimulus from the Reserve Bank, the stimulus from the Government, the flexibility shown by employers and employees: all these things have been important in Australia's comparative economic strength.
LEVI:
On the Central Coast, we have a lot of self-funded retirees, sort of disproportionate demographic really. They have done it really tough, haven't they? Is there anything in this Budget to make life easier for them?
BOWEN:
Well, there's a couple of things. Firstly, the 50 per cent tax break on interest, the first $1000 of interest on savings, which comes into effect on 1 July next year, that applies across the board. But obviously self-funded retirees are relying on their savings. That has some modest impact on them, some improvement for them.
And of course, one of our superannuation reforms was that for people over 50, to enable them to top up their superannuation payments at a concessional tax rate if they have less than half a million in their account. We announced that last Sunday but that's confirmed in the Budget last night.
So, a couple of measures which would provide some assistance to people who are either self-funded retirees or are on the road to becoming self-funded retirees.
LEVI:
The Opposition are basically saying that this mining super profits tax will kill the goose that laid the golden egg, will stop investment, will stop the mining sector employing people and growing. It was quite interesting, we were able to put that theory to the test here in very real circumstances on the Central Coast and ask Kores, the Korean mining company, about their multibillion dollar proposal and they said no.
BOWEN:
Yes.
LEVI:
Were you aware of that?
BOWEN:
Yes, I am aware of that case study and of course we have done a lot of work on this, a lot of modelling, a lot of economic analysis, and it's clearly not the case. The Opposition claims are very clearly not the case.
It's worth remembering that we've had a super profits tax in Australia for 20 years. It hasn't applied to mining on the mainland. It's applied to gas and petroleum exploration off shore and it's called the Petroleum Resource Rent Tax. Bob Hawke introduced it 20 years ago. We heard then exactly the same things we are hearing now, that it would kill that sort of exploration, that we would kill the golden goose, et cetera.
Now, what's happened since, that part of the industry has grown, it's expanded, and the biggest investment in Australian history, the Gorgon investment in the North-northwest shelf, is being done with a super profits tax, because investors factor it into their considerations, they do their sums and many, many projects stack up very well.
LEVI:
Shadow Treasurer, Joe Hockey, was on the airways this morning criticising that the mining super tax, saying, the cost to the big mining companies would be passed onto consumers as mining products were in everything.
BOWEN:
Well, this is just part of their scare campaign, and they are desperately trying to think of any sort of scare campaign they can run against this tax. But it's clearly not the case, and our evidence and research shows that activity in mining will continue, will grow, will be boosted.
We're reducing the corporate tax rate across the board, which affects every single company in Australia. Of course, the Liberal Party's policy is to increase corporate tax, with all the flow on effects that that might have across the board for every company. We want to reduce corporate tax; we want to bring our corporate tax rate down. The Liberal Party wants to increase it, so Mr Hockey is being a tad hypocritical.
LEVI:
What about your average superannuant? What do they get?
BOWEN:
Well, as I said, last week we announced our superannuation reforms. A number of those reforms are very substantial: the catch up for workers over 50, the increase in the superannuation guarantee from nine per cent to 12 per cent, which will increase the superannuation retirement benefit for somebody, who's say 30 today, on average weekly earnings – as many of your listeners would be around that level – increase their retirement benefit by $108,000 by the time they retire. So an extra $100 000 in the superannuation account by the time you retire is something very substantial, and of course for people who want to save in other ways, as I mentioned, that 50 per cent tax break. So we'll give you 50 per cent tax back on your interest that you earn on your savings up to the first $1000 of the interest. So that means roughly onto those interest rates, if you've got about $16,000 away in a term deposit or some form of other sort of interest-bearing account, we'll reduce the tax on that.
LEVI:
Alright. Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, thanks for joining us.