HOST:
I've pleased to say we've got the Assistant Treasurer, David Bradbury, on the line. David, are you there?
DAVID BRADBURY:
Good morning John, how are you?
HOST:
I'm good thank you. How the hell are we going to plug a $4 billion black hole in the Budget.
BRADBURY:
Well, look, this is a difficult exercise and the nature of the task has been made much harder as a result of the international environment. All of the decisions that we're taking are occurring against the backdrop not only of the debt crisis that's occurred in Europe, sluggish growth in the US, increasingly we are seeing a softening of growth in our region in the Asian area. So these have presented real challenges, but we have put in place a number of responsible savings measures. Now we understand that they won't be universally loved. When you take decisions of the sort that we've taken, you will upset some people but in the end we've taken on balance the broader judgement that what is important for the national economy is returning the budget to surplus to give the Reserve Bank the room…
HOST:
I don't understand why in the first instance you didn't err on the side of caution. I mean, it was a pretty big statement to make, wasn't it?
BRADBURY:
Well, I think that it should be beyond contention that where the economy is growing at trend, unemployment is at contained levels and inflation is also at contained levels, these are the times in the economic cycle where you should be starting to repair the budget balance sheet and return the budget to surplus. It's important to understand this. If you compare the Australian economy to every other major advanced economy in the world at the moment then we are at the stronger end of the cycle. We've grown 11 per cent since the Global Financial Crisis, unparalleled in terms of major advanced economies around the globe. This is the time, and we took the view that during the Global Financial Crisis we needed to borrow some money to invest in supporting jobs and to keep the economy moving. Now that did occur and didn't occur everywhere else in the world, but it certainly happened here. But now as you move through that period, as your economy is growing, and the IMF says that our economy will be the fastest growing of the advanced economies not just this year but next year as well.
HOST:
But that's not going to help people who are going to have the Baby Bonus cut back from $5000 to $3000. All that high faluting talk is going to help them, isn't going to help people who are doing it tough.
BRADBURY:
Let's address the Baby Bonus. The question here is that, ultimately, we have to make a decision as to whether or not the payments that are in place are sustainable in the longer term. The Baby Bonus, and let's not forget that when it was first introduced as a tax offset by the Howard Government, it was only available for the first child. People forget that, when it was introduced it was only available for the first child.
HOST:
Excuse me, why should they remember it?
BRADBURY:
Because there are many people out there that raised their children in the past without any of that support and that's a point to make.
HOST:
There would be literally hundreds of thousands of people listening to this program right now who have done just that.
BRADBURY:
And many of them have told me personally how they think that it's important that we have a sustainable approach to this. So what we are saying is for the first child, for those people that are eligible, they will get the full payment which is around $5000, but if you go on to have subsequent children, then you get $3000 for each of those children unless you have multiple births.
HOST:
Ok, but who's idea was it to reward women for having children. Who came up with that brilliant idea? I mean the world worked pretty well when people just went around having babies.
BRADBURY:
Well, that obviously was a policy decision that had been taken in the previous Government. But we …
HOST:
But you could have cancelled it.
BRADBURY:
We take the view that it's an important payment, particularly for the first child.
HOST:
But why? But why should taxpayers be paying women $5000 because they want to have a baby?
BRADBURY:
Well, it's a recognition of the added cost that people face at that particular time in their lives.
HOST:
Have you ever thought that there are people having babies so that they can get the five grand?
BRADBURY:
Well, I think that there may well be a group of people that have made those judgements and that's not a good thing.
HOST:
No, why should the taxpayer pay because some little girl feels like having a baby and wants $5000. I mean, why should the ordinary, hardworking people who are listening to this program all over Australia, why should they have to pay.
BRADBURY:
But equally, and I think the vast majority of people out there trying to build a family and build a future for their family, they recognise that when you do have that first child in particular there are a whole range of course and it is helpful if the Government is able to provide some targeted assistance.
HOST:
Yeah, but when did the world change. I mean my mum, God bless her, didn't get any help when I was born and God knows she could have done with a bit.
BRADBURY:
Well, you know my Grandmother had 10 children so. [laughter]
HOST:
And got absolutely no help. Well you would know better than I, so what in the world are we doing rewarding people for having babies. Are we that desperate for a population?
BRADBURY:
Well, look it is important that we do provide support to families, but the point that we're making in reducing the subsequent payments of the Baby Bonus is we think that you need to have a look at the full suite of supports that we put in place and the Family Tax Benefit is the most significant ongoing means of support. That's an ongoing assistance that is provided to families across the year and we have increased that certainly over our period in office to make sure we provide adequate support for families. But we have taken to reducing the Baby Bonus for those subsequent children and you make the point, and there are plenty of people out there will make the point and argue that perhaps there shouldn't be a Baby Bonus. We've taken the view that it is helpful, but we also recognise the fact that most of those costs are faced by parents with the first child and there's not quite the same case for making that money available in the same amount for subsequent children.
HOST:
Yeah, well, I mean, do you really think that people ought to get around having babies if they can't afford it. A lot of young people that I talk to and know, someone in the family who have said 'we would like to have children but we can't afford them yet, we'll just have to wait a little while'. I mean, everybody expects instant gratification, get married and have a baby now.
BRADBURY:
John, you're talking to a father of four children so I know as well as most just how expensive it is to bring kids up and to try and give them the opportunities that I think most parents want to give their kids. These are ultimately personal choices and you're right, a large degree of personable responsibility has to be accepted by the parents that are bringing children into the world.
HOST:
The Government is hardly encouraging people to have personal responsibility if they know if they get pregnant that they're going to get some kind of bonus for having an enjoyable ten minutes or whatever it happened to be.
BRADBURY:
It's also worth making the point John, that one of the things that we have done since coming to office was we took away this being a lump sum payment so it is now paid in a series of instalments over the first weeks of when the child is born. So it does actually take away some of the incentive for people to just try and see this as some sort of opportunity to cash in and ensures that that money is provided in a timely and ongoing way. And I think to some extent, and certainly the experience that I've had in talking to people in my community, is that that has taken away some of those negative effects that were there when, particular from young people, saw opportunities around the idea of getting $5000 was something that they wouldn't experience in any other way.
HOST:
No, that's true, that's true. But I still don't quite understand why you're delaying funding for over $500 million to research and government grants. Isn't it very, very important that a country like Australia invests in research and development. I would have thought it was one of the most important investments a country could make.
BRADBURY:
You're right and we have considerable increased funding to grants year after year in our time in office. But all areas of expenditure have come under review and I just want to make the point was to why we are doing this. Ultimately, the most important reason for us to get the Budget back into surplus is to make sure we give the Reserve Bank the room it needs to cut interest rates. And that's not insignificant to the household budgets of people across our country nor is it insignificant to the business who are paying interest on their overdrafts and the loans that they have taken out. And since we've been in office, the cuts that have been delivered to interest rates, forgetting about amounts flowing through, this is actual cuts to budgets, if you're on a mortgage of $300,000 then you are receiving a cut in your interest repayments of about $4,500. That's not insignificant, that's providing support to those people that are out there working hard, trying to invest in their own property and trying to build a future for them and their family.
HOST:
Because of your company tax changes, the Government is now going to receive 14 months of tax payments in a twelve month period. Isn't that fiddling the books just to reach some kind of artificial surplus? The answer's got to be yes.
BRADBURY:
Well, the first point to make is that no business will be paying any more tax than under law they are required to pay, but there will be a question of timing over when they money is to be paid.
HOST:
But it is fiddling the books, isn't it?
BRADBURY:
We are trying to do this because we want a more efficient tax system and this is not the first step, this is actually a step along a journey that this country's been in. If I can spend just one moment explaining that. Before the late 1980s, companies, they didn't pay any tax during the income year and they paid in a series of instalments in the following year after the tax had been levied on them. Now, over a period of time we moved towards making them pay tax more contemporaneously, there were changes made in the 1990s and then in 2000 there were some really significant changes made by the Howard Government. They did two things, they introduced the GST and as part of the GST all of the companies we're making these changes to, they are now already required to pay their GST on a monthly basis. The other change the Howard Government made at that time was to bring income tax payments from companies into line with quarterly payments. What we're now doing is going the next step and saying rather than making those tax payments on a quarterly basis, we're asking you to do it on the same basis that you're doing for the GST, and that is a monthly basis. And this is only from the 1st of January 2014, will only be affecting companies whose turnover is greater than $1 billion. So this is the next step in a process of making the corporate tax system more efficient. I understand why businesses are not lining up to thank us for this because they would rather hang on to that money, tax that is owed, rather hang on to that for as long as possible. But in the end we've got obligations in terms of how we manage the nation's finances and we think that this is a reasonable thing for us to be asking businesses to do.
HOST:
You've been there a while, why have you only just decided that you have this responsibility that you obviously didn't think you have before.
BRADBURY:
Well, look this is a process of ongoing evolution and I guess you could say why did it take until the late 80's to make companies start to pay their tax during the income year, why did it take til the year 2000 before we moved to quarterly payments. Look, there's no question that we are focused on delivering not only a surplus in this year but across the forward estimates and in the context of that we've had to make some hard decisions. This is one, we believe it will make the system more efficient, but of course it's all there in the MYEFO papers, the mid-year budget papers, for people to see. It will have a positive impact on the bottom line and we're not hiding from that, but certainly we think that this is a series of proposals that has merit in its own right.
HOST:
Ok, David you've been very generous with your time.