HOST:
In Perth at the moment is the Assistant Federal Treasurer David Bradbury, he's with me in the studio. Good morning David.
BRADBURY:
Good to be with you Paul.
HOST:
We just played that ad then, the household assistance package ads which started yesterday. It's all about the compensation for the carbon price – some people call it that, Tony Abbott will call it a carbon tax – whatever you call it, it doesn't mention carbon in it at all. You've set yourself up, haven't you for people to take the view that you just don't want to talk about the carbon tax.
BRADBURY:
Well, I think that if the suggestion is that we're not going to be talking about the carbon tax then that's quite a bold claim. The reality is that this is a subject that many people are out there talking about. I don't think you could ever accuse of hiding this under a bushel. It's been the subject of enormous debate, in fact a lot of exaggeration we would say in terms of the commentary around it. This was really an attempt to put out there the facts about the payments and money that is coming into people's accounts.
I think the importance here is, and I can certainly say from experience having dealt with constituents in my electorate on this issue, that when people get that extra payment come into their bank account it can cause some anxiety, it can cause a little bit of concern because people don't want to overspend money that comes into their account if they weren't entitled to it so this was really, as much as anything, about just letting people know that the money's on its way and the fact that that's connect with the carbon price, this is the next stage, if you like, in the advertising effort. The earlier stage set out some of the reasons why we're doing what we're doing and this is really simply that second stage.
HOST:
But this is compensation for the carbon tax?
BRADBURY:
It is, yes.
HOST:
That's what this money is.
BRADBURY:
Yes.
HOST:
You're saying there's concerns, is that from people who have previously been recipients of other Centrelink payments and have had to pay them back because there have been glitches?
BRADBURY:
That's right. For many families or individuals in receipt of payments, if their work arrangements change or if the number of hours they're working change it can have an impact on the level of payments they're receiving and any family that's ever been in a situation where they've had to pay money back knows that you really need to be in constant contact with whoever it is that's paying that money, whether that be Centrelink or Family Assistance Office, just to make sure that what you've got and what you may already have spent was in fact what you're entitled to.
HOST:
Yeah. That carbon tax money, other than for people who are recipients of the pension, I think, they get a payment in advance. That happens next month, doesn't it? But the bulk of us, if we're eligible, will be getting that money next year, in 2012.
BRADBURY:
No, also recipients of family payments will get a bonus payment as well, so it's people in receipt of the pensions or self-funded retirees that might be in receipt of the Commonwealth Seniors Health Card, they'll be receiving a payment. In addition to that, people that are in receipt of family payments – and the actual amounts will vary depending upon your number of children, the age of children, factors such as that – but people in receipt of family tax payments will also be receiving some benefits ahead of the first of July, but you're right, on the first of July that's when, at the beginning of the tax year tax changes come into effect. Most significant there is the tripling of the tax free threshold, which, if this were happening in any other context, I think we'd be talking about it a lot more because it's actually a pretty significant reform of the tax system. It means that somewhere in the order of about a million Australians that are working will be taken out of the tax system. They won't be paying any tax and they won't be required to go through the tedious exercise of putting a tax return in which is pretty significant.
HOST:
This is the lifting of the threshold?
BRADBURY:
That's right, up to $18,200.
HOST:
Look, I understand there might be some confusion among families because they're going to be getting a fair few cheques from you in recent times. That School Kids Bonus is an interesting one in itself. I think Tony Abbott sort of cocked up his response – he cocks up a few of them – but when he was asked to compare that bonus to the baby bonus, he was asked what the difference was and he came up with that stupid reply, ‘well it just is'. I would have thought that the appropriate response from him would have been, well the baby bonus was paid when we were actually in surplus, the surplus had been established, and this bonus is being paid to families when you're only going towards a surplus – actually there's a surplus in the Budget but it isn't actually crystallised until the end of the Budget process. Isn't that the substantial difference between the two? You're spending money that you haven't actually got.
BRADBURY:
I don't accept that because an important point that we've got to make is that the money that is tied up in the School Kids Bonus, that's money that was already allocated in the Budget previously with a little bit of a top-up. And just to explain that: since we came into office in 2007, we had proposed an Education Tax Refund, and the idea here was that all of the families that will now be in the receipt of the School Kids Bonus, they were the target families for that payment, but what they had to do was they had to clock up expenditure in relation to –
HOST:
And you allocated $1.3 billion to that.
BRADBURY:
Look, that's about the amount. The issue was there were about up to a million families that were entitled to access that benefit that either weren't accessing it at all or were under-claiming. Now when we sat down and devised this scheme, the intention was that that money ended up in the pockets of families that were in need. We want it spent on kids and their education. We then went through a couple of processes of refinement. The first one was we expanded it to school uniforms because originally you couldn't claim for school uniforms, but even after having done that it became clear that there were many families where the paperwork was just a bit too much for them. The other point to make is that under the old Education Tax Refund, you only got the money at the end of the tax year, and for many families the horse has bolted to some extent; the hardest times, the pressure points for the family budget are when the kids go back to school. So what we decided to do was to wrap that up into two automatic payments so on the one hand parents didn't have to go through that exercise of keeping all of the receipts and I think it's probably fair to say that for some parents, we had underestimated how difficult an exercise that was. If you're simply buying a laptop –
HOST:
Why is it difficult?
BRADBURY:
Well, I think if you're simply buying a laptop computer or paying for a broadband connection and that's the expense that you're claiming then it's a bit easier to do, but if it's about keeping receipts for pencils –
HOST:
Yeah, shoes.
BRADBURY: - shoes. And my wife made a good point to me the other day. My son came home and he'd lost his tie, so she had to run down and get a tie. Now, the nature of the expenses that you're incurring, the priority when she had to go down and get his tie was to make sure she could get him off to school the next day fully dressed. The fact that you've got to then keep the receipt – we wouldn't have been entitled to it, mind you – but that's just typical of what a family would face. The pressure of just getting your kids sorted out, getting them off to school, that's enough of a hassle as it is.
The point that I'd make is that when you look at the amounts of money involved, you know, I've got young children, I don't think you could send your kids to school and not clock up those costs so this suggestion that the money's going to be spent on other things – if the suggestion is that you can send your kids to school, to primary school, and it's not going to cost you $410, I think you're out of touch if that's the view that you hold. So, in the end, we took the view that we wanted targeted assistance to get to people when they need it most, and that's at the start of the year and the second payment at the start of the second half of the year, and look, frankly, I think it's just going to be a really positive development.
HOST:
Yep. Just moving away from the family side of the Budget. A decision was made not to give companies the one per cent cut in the company tax, and I understand the politics behind that, the Opposition was saying you wouldn't get that through the Parliament, you decided not to test whether you would or not and I know that people on the business council think you should have done that. I've had that discussion with the Prime Minister last week so I won't go over that ground again, but are you going to revisit this issue of a tax break for companies?
BRADBURY:
We are committed to cutting tax for companies. Can I just make this point. I was out talking to a couple of business groups in the area yesterday, I was out talking to the Peel Chamber of Commerce and Industry. They sent me a very clear message that there are plenty of small businesses out and about that are doing it tough and a cut in the company tax rate would have benefitted many of them. But let's not ignore the fact that we have done some significant things when it comes to small businesses. Our new instant asset write-off, which is funded out of the MRRT, that is something that will deliver great benefits to businesses investing in their capital equipment. They're getting an upfront deduction where it's under $6,500 for each of those items.
So we are focused on delivering tax measures for small businesses. On the company tax cut, we wanted to cut company tax but the reality is that we had on the one hand the Liberals and Nationals saying they were opposed to it, on the other hand we had the Greens saying they were opposed to it. Now, you've got to make calls along the way as to how far you want to flog a dead horse in the current environment and the reality was that we weren't going to get that tax cut through. But what we've also said is that we've established a really positive process called the Business Tax Working Group, and this was the process that gave us one of the other measures that we delivered in the Budget, which was the loss carry-back initiative, which will be a tremendous structural reform in the tax system.
It will help many small businesses and many businesses in sectors doing it tough. But the Business Tax Working Group, a very good process, already delivered some runs on the board, we've said that they've had, through their process, identified up to this point areas where there could be opportunities for Government to remove some concessions that exist for business that will increase Government revenue. We've said let's have a look, in a revenue-neutral way, as to whether we can look at some of those other savings measures to fund a cut in the company tax rate. So that's the process we've committed ourselves to, there'll be plenty of consultation, we'll make sure that people are a part of that process, but in the end, delivering a cut to the company tax rate will deliver those businesses that are incorporated but it will also go to the question of our international competitiveness; one of the main reasons why you try and cut your company tax rates is because capital is so fluid, it's out there, it's look at places to invest and in the end we've got to make sure that we've got competitive rates.
HOST:
David, that was going to be paid for, as you said, out of the mining tax, the MRRT. We're consistently hearing iron ore companies here in Western Australia, 80 per cent of that money comes out of the iron ore industry in Western Australia, we're consistently hearing them say they don't think they're going to be paying any MRRT in the first couple of years. I mean, what do you make out that? It's almost a constant theme coming out of the iron ore miners.
BRADBURY:
Well look, I hear on the one hand that no tax is going to be paid under the MRRT, yet I hear with the other ear a lot of noise, a lot of colour, a lot of action and one of the most vociferous campaigns by an industry body or an industry sector that we've seen in recent years. Now you've got to put the two together and say, ‘where is the truth in the matter?' What we expect is that the reforms we've made through the MRRT, whilst it might be true that not as significant a chunk of that revenue is expected to come through in the early years, there will be, over time, perhaps, opportunity for greater revenue flows into Government coffers, that of itself is not a bad thing and probably reflects one of the underlying principles that has driven our desire to move towards a profits based tax rather than one that is focused on royalties, a volume based output production assessment, and that is because it is one that says that tax kicks in when companies are profitable and where they are achieving profits that are principally as a result of them exploiting monopoly economic rents that they get, that's the technical economic jargon of it. So we are going through a period at the moment where, if you look at the huge hit we've taken in our Budget on Government revenues, $150 billion over the last couple of years, there's a couple of reasons and one of the significant reasons is it's connected to the resources boom and it's because we know the way our taxation system is structured that often in that early investment stage of the cycle when lots of money's being pumped into capital investment in the sector that there are deductions to be made and at that point less tax is made.
But in the end, we haven't just delivered a mining resource rent tax in order to get some quick improvement in Government cash flow today, this is actually a longer-term proposition. It's about setting in place a framework that provides certainty for investment but ensures that over the longer term as these non-renewable resources that are the property of the Australian people, as they are exploited for the legitimate commercial benefit of those operations, that an amount of that is secured and preserved for Australia today and for future generations, and that has been why we've introduced this –
HOST:
But you're not bringing this in for future generations, you're spending it on a year-by-year basis.
BRADBURY:
Well there are a range of initiatives that flow from this that will have structural and inter-generational benefits so if you're investing in infrastructure, which will be a key part of what we are doing –
HOST:
But you're actually spending more than you're raising on most estimates of the MRRT.
BRADBURY:
Well I don't think that is true, and you've got to have a look at how we've re-calibrated the expenditure that was connected to it because obviously the key component was the cut in the company tax rate. We wanted to deliver that, we couldn't, but in terms of the other areas where we're funding other initiatives, the concessionality that is provided to superannuation and the tax concessions that the Government funds as part of the superannuation guarantee charge, that is inter-generational. Boosting our national savings and supporting people in retirement take away some of the challenges we face with an ageing population. These are structural and inter-generational reforms. The infrastructure investment that's linked with the MRRT as well. So, I think it's important to understand that as these resources are dug up and exported, a little bit of Australia and a little bit of our national wealth disappears each time that happens. We, through this process, wanted to be able to secure a fairer share of that amount. Now, it's been a very contentious issue, but I just make this point: on Budget night, where the Opposition were exposed around this whole issue, you know they said we oppose the tax so we're not going to support any of the expenditure.
They are now supporting large parts of the expenditure that is linked to this. But on the night of the Budget when Joe Hockey was asked about this he said, well you've got to understand that the MRRT only represents a very, very small proportion of overall tax revenues. Now if that point had been made and acknowledged by the Opposition some time ago, I think the nature of the public debate we've had would have been a much more rational and sensible one, and it also raises the question: once this has been introduced and accepted overwhelmingly by the industry and forms the basis of future planning arrangements at a time when we've got a record pipeline of investments still coming into the resources sector, on what basis are the Opposition going to unwind this?
What is the rational basis for trying to unwind this when it's a tax that is accepted, it's modest in terms of proportions to overall revenue that Government receives and it's something that has acceptance within the sector. You know, I find it extraordinary and I think it's an untenable position that they'll be going to the next election wanting to have a tax policy where the only people they are providing tax cuts to are a sector of the economy that is an exceptionally profitable one and making a lot of those profits out of exploiting monopoly rents.
HOST:
That's an argument of course for a super tax on banks, but we won't go into that. Good to talk to you David, thanks a lot.
BRADBURY:
Great to talk to you Paul.