CHRIS O’KEEFE:
Now, I won’t waste any time – the Federal Treasurer Jim Chalmers is on the line. Treasurer, g’day.
JIM CHALMERS:
G’day, Chris, how are you?
O’KEEFE:
I’m not too bad. So a backflip, a broken promise? What is it?
CHALMERS:
Well, we’ve definitely come to a different view, Chris, and there’s no use pretending otherwise. We’ve come to a different view for the right reasons, and that is that we can find a way to give a bigger tax cut for more people to help them with the cost-of-living. This tax proposal we put forward today is better for your listeners because it provides more relief to people that we know are under pressure.
O’KEEFE:
Integrity is important. Honesty is important. Trust is important. Are you worried that you’ve breached that?
CHALMERS:
No, I think you build trust by taking the right decisions for the right reasons and in the interests of the people, even when it’s politically difficult. This is about putting people before politics. Obviously, our opponents and others will try and always make this about divisive politics. What we’re trying to do is give everyone a tax cut but with a much bigger emphasis on middle Australia. We’ve found a way to do that responsibly and affordably and so we’ve changed our position. Just as importantly, we’re fronting up and explaining why we’ve changed our position, and we’ve changed our position because we can get a much better outcome for more people who are dealing with these cost-of-living pressures that you and I have discussed before.
O’KEEFE:
I’m a little bit bemused or curious as to what the definition of middle Australia is, because there’s been a lot of talk about middle Australia. What is middle Australia?
CHALMERS:
Well, when I think of middle Australia I think of those nurses and teachers and truckies who are working their butts off, often doing shift work and often working more than one job to make ends meet and provide for their loved ones and get ahead. And so what you’ll see in our tax plan –
O’KEEFE:
But surely is it not a spreadsheet? There would certainly be somewhere on that spreadsheet that you would define middle Australia as? Is it from $80,000 to $120,000? What’s the sort of bracket you’re looking at?
CHALMERS:
Well, certainly those income levels that you just mentioned are big beneficiaries of what we’re doing today. You know, for someone on the average income –
O’KEEFE:
Yeah, but is that middle Australia?
CHALMERS:
Well, certainly people on the average income are middle Australia.
O’KEEFE:
Which is what?
CHALMERS:
Well, the average is $73,000, but there’s big benefits for people on 100, 120, 140 grand and everyone gets a tax cut, even people on the highest incomes get a tax cut. I think this is a really important point, and I suspect you’ve probably engaged on this before: what we’re trying to do here is not set people against each other. Everyone gets a tax cut. We’re trying to have a bigger emphasis on people on these middle incomes because we know – and you know; you’re engaged with your listeners – you know that they’re under the pump. We acknowledge that. But more than acknowledge that, we’re doing something about it.
O’KEEFE:
Do you think that a one-income household with a mother or father, sole breadwinner on $180,000 or $200,000 is middle Australia?
CHALMERS:
Well, certainly, you know, people who are, you know, working hard and providing for their loved ones –
O’KEEFE:
But you’ve dudded them.
CHALMERS:
I don’t agree with that, Chris and I’m glad you said that, because I don’t agree with that. Somebody on $190,000 will get a four and a half thousand dollar tax cut. Everyone gets a tax cut here. Everyone is paying less tax next year compared with this year as a consequence of the changes that we are putting forward today and it’s a decent tax cut for people on higher incomes.
I say to your listeners who might be on higher incomes, I say good on them, that’s a good thing. We’re giving you a tax cut as well but we have got a bigger emphasis on people on middle incomes because we know that when it comes to these cost-of-living pressures you need to do what you can to help people address them, and that’s what we’re doing today. We’re doing it in a way where everyone gets a tax cut but there is a bigger emphasis on middle Australia.
O’KEEFE:
So do you think the sole breadwinner on $190,000 with a couple of kids and a mortgage in Sydney with interest rates the way they are, with cost-of-living the way they are, would you class them as middle Australia?
CHALMERS:
I would, and that’s why they’re getting a tax cut.
O’KEEFE:
But just not as big a one as they voted for?
CHALMERS:
Well, they’re getting a bigger tax cut than people on lower incomes.
O’KEEFE:
Because they pay more tax.
CHALMERS:
We’ve been upfront today that instead of getting a $9,000 tax cut someone on a couple of hundred grand will be getting a $4,500 dollar tax cut. That’s still in my view a substantial tax cut. It’s part of the design of what we’re putting forward today; everyone’s getting a tax cut. Someone on that level of income gets four and a half grand. Further down the income scale where they’re on the average income you’re getting twice as big a tax cut – more than double the tax cut than Scott Morrison would have given you when he legislated it five years ago.
O’KEEFE:
Sure. Let’s speak – this is Steve from Singleton. He emailed us: “Hi, Chris. My question to the Treasurer is about aspiration and working hard. On average I earn $110,000 a year. If I make myself available to work extra shifts my annual pay goes beyond $140,000. Why under your changes to the tax rules would I now work the extra shift?”
CHALMERS:
Because, Steve, if you’re on $140,000, you get a bigger tax cut under what we’re proposing. If you’re on $140,000 you get $3,729. Under the old tax you would have got $3,275, so you get almost 500 bucks more from the tax cuts that we are proposing today. And we say to people who want to work more hours, that’s a good thing. If you can, you want to work more and earn more, we understand that, we are rewarding that effort.
When it comes to aspiration, I don’t believe that aspiration is limited to people who are already doing okay. I think aspiration is really the driving force of the whole country. People on middle incomes and lower incomes are aspirational as well – those truckies and teachers and nurses which keep our country going. They’re the people that we are backing in with these tax cuts that we’re announcing today.
O’KEEFE:
And they’re also eligible for family tax benefit A, family tax benefit B, Medicare rebates. You’ve got a whole range of cost-of-living rebates, power bill rebates. Yet the people on the higher end of that scale are means tested, they don’t get anything.
CHALMERS:
Well, the people on those middle incomes we just talked about – Steve’s income when he’s having a good year, 140 – you know, they are bigger beneficiaries of our tax cuts. We are trying to reward effort. We are rewarding aspiration. We understand that people want to work more and earn more, provide for their loved ones and get ahead, and we’re backing people in.
O’KEEFE:
Are you rewarding aspiration by keeping the 30 per cent tax bracket, though – the 37 per cent tax bracket, I should have said.
CHALMERS:
Well, we’re making the system as effective as we can. We’re trying to give a tax cut to everyone, which is what our tax plan does, even with that bracket in there that 37 cent rate going into 135 grand up to 190 grand. There is a lot of tax relief for people in the system even with that bracket put back in.
O’KEEFE:
Why don’t you keep it there?
CHALMERS:
Because we needed to find a way that we could provide more tax relief to more people but in an affordable way and that means trying to spend the same amount of money on the new tax proposals as was being proposed under the old ones. That’s the key reason why we make it not inflationary – because it’s broadly the same envelope, broadly the same cost. We didn’t want to spend heaps more than that because we didn’t want to push up inflation. We didn’t want to spend heaps less than that because we want to make sure that we are providing as much cost-of-living relief as we could to as many people as we could.
O’KEEFE:
So instead of addressing bracket creep, which was the purpose of stage 3 to begin with, you kept the 37 per cent bracket there so you could raise more money to give to people on lower incomes, is that right?
CHALMERS:
No, we are addressing bracket creep. That’s a really important –
O’KEEFE:
No, no. We’ll get to bracket creep in a second. But you kept 30 per cent – the 37 per cent bracket there so you could raise more money to give to lower incomes, is that correct?
CHALMERS:
At the same time as we’re still giving a tax cut to people on the 37 cent rate and the higher rate as well. Everyone gets a tax cut, Chris, that’s important to remember.
O’KEEFE:
Yeah, sure, sure. I’m just interested as to why the 37 per cent stayed there.
CHALMERS:
Because we needed to make the whole package revenue neutral. That’s important.
O’KEEFE:
So you needed the money. Bracket creep, talk about it.
CHALMERS:
Putting that in there means people still – everyone still gets a tax cut – all 13.6 million workers, taxpaying workers, get a tax cut.
O’KEEFE:
Just not as much as they voted for. Let’s talk about bracket creep.
CHALMERS:
So what we’re doing is we are returning bracket creep. We’re getting those average tax rates down. There’s more than one way to do that, but one of our motivating objectives here is to return bracket creep. I’ve long been a supporter of returning bracket creep when governments can afford to do that. There’s more than one way to do it and the way we’ve done it is the way that puts a much greater emphasis on middle Australia, tax relief for middle Australia, and that’s how we’ve returned the bracket creep.
We released this Treasury advice today, Chris, and I understand that you’re listeners driving around Sydney today might not get the chance to go through pages of Treasury advice, but one of the things that the Treasury advice says is this is a good way to give back bracket creep because it deals with bracket creep where it does the most damage, and that’s in the middle income levels.
O’KEEFE:
Treasury advice, though, shows that you’ll collect 28 billion in tax over 10 years because of bracket creep.
CHALMERS:
Well, what the costings show is over the four years of the Budget it’s broadly neutral. And the difference over the 10 years, as you point out, is the difference – and I’ll make sure I get it exactly right – the cost of the tax cuts over 10 years is around 360. Under their proposal it would have been about 388, under what existed but the important thing about that, Chris, is it’s revenue neutral over the four years. We actually give back a little bit more back over four years than what stage 3 would have done. Over the 10 years the option is there for governments of either political persuasion to take decisions in the future, return more of that if they would like to.
O’KEEFE:
I’ve got a question from Andrew. He’s a financial planner in North Sydney. And he says, “Chris, I’ve got clients with taxable incomes under $120,000 a year but they are multimillionaires. Do they deserve a tax break?”
CHALMERS:
Well, I think this question about tax concessions is a slightly different one. Andrew obviously knows his stuff working in the industry but we can’t avoid giving tax cuts to people who are working really hard and earning 120 grand and providing for their families. We don’t want to avoid giving them tax relief just because there might be people who are worth much more than that getting their incomes down. Our priority here is for good people working hard, shift workers who, you know, are working hard and making, say $120,000. We want to give them heaps of relief. Obviously there’s a whole separate question about the way that people get their incomes down, often legitimately, and Andrew would be helping them do that legitimately.
O’KEEFE:
Can I ask about –
CHALMERS:
But our emphasis is on people who are working and making that kind of coin.
O’KEEFE:
I raised this on the programme yesterday, and it feels like there is a disconnect between income and wealth in this country. Just because you earn a good income does not mean you’re wealthy.
CHALMERS:
There is a difference between wealth and income, and the tax –
O’KEEFE:
You tax the bejesus out of income, not so much wealth.
CHALMERS:
Well, we’re trying to return some of that income tax. We are returning around $360 billion over 10 years of that income tax for all the reasons that you and I have just been through. You know, we’re getting those average tax rates down. There is a different system for taxing wealth and taxing income, you’re right. There is a kind of a debate amongst the economists about the optimal mix. What we’re doing here is making sure we get income tax down for people who are working hard and dealing with these cost-of-living pressures that you would hear about from your listeners every day.
O’KEEFE:
The advertising campaign that you’re running, how much is that costing us?
CHALMERS:
Well, the one that we’re running now is a Labor Party ad, and so the one that people might have seen on X, on what used to be called Twitter, or on social media as I understand it, that’s one that’s been developed I think by the Labor Party itself.
O’KEEFE:
Okay, so it’s not a government-funded ad?
CHALMERS:
No.
O’KEEFE:
Will there be government-funded ads?
CHALMERS:
That’s to be determined, Chris. I think there is a case for helping people understand the benefits that are coming, but there hasn’t been a decision taken about that.
O’KEEFE:
Have you got any cost as to what that would be?
CHALMERS:
No.
O’KEEFE:
It might help you make the decision.
CHALMERS:
I don’t.
O’KEEFE:
Okay. On the Greens, you’ve got to get it through the Senate. Adam Bandt has been pretty clear that he wants more relief for people on lower incomes. Are you going to budge? Are you going to water it down further?
CHALMERS:
No, this is the package that we’ll put to the Parliament. This is the package that we want to see passed through the Parliament. Obviously parliamentarians from different parties and different parts of the crossbench will have different views. I would be surprised if the Greens couldn’t support a set of tax scales and tax arrangements which are much fairer than what they replace.
O’KEEFE:
How long have you been in the Labor Party? You’re going to be surprised at the Greens?
CHALMERS:
The point I’m making, Chris, is that they have called in the past for these tax arrangements to be fairer. They are fairer, but, most importantly from our point of view, they’re better for middle Australia than the tax cuts that they replace.
O’KEEFE:
Sure. Now, is this – I’ll let you go very shortly – but is this do you think – you’re saying that you’re addressing a cost-of-living crisis, correct?
CHALMERS:
Mmm-hmm.
O’KEEFE:
And an inflation crisis, correct?
CHALMERS:
Yeah.
O’KEEFE:
Both of which are temporary. So why do we need a permanent solution in the tax system for a temporary problem?
CHALMERS:
Well, we believe in reward for effort and aspiration and all the things that you and I have had a good yak about today. You know, we believe that when governments can afford to lower taxes, particularly for middle Australia, then governments should do that. You’re right that this is a permanent and ongoing program of tax relief and that’s a good thing for all the reasons that you and I have discussed today. What we’ve been able to do when it comes to inflation is we’ve been able to provide this substantial cost-of-living relief, bigger tax cuts for more people to help with the cost-of-living without pushing up inflation, and that’s been a really important thing.
O’KEEFE:
Treasurer, I’ll let you go. I know you’ve got a lot on. Are you happy you got your way finally with the Prime Minister? Bend him to your will?
CHALMERS:
I don’t see it that way, Chris, but thanks for having me back on your show.
O’KEEFE:
Jim Chalmers, Treasurer of Australia.