STEVE AUSTIN:
Now, if you're in the electorate of Logan, keep listening because your federal representative, Jim Chalmers, is joining me. As you've been hearing today, the federal government will halve the stage 3 tax cuts for the country's highest income earners and use the money to deliver a tax cut across the board. The Australian Financial Review says, and I quote, overall, vastly more people, almost nine in ten taxpayers, will benefit from the broken tax promise than adversely be affected, end of quote. So, let's go to our Treasurer, Jim Chalmers. Jim, good morning to you. Happy New Year. Jim Chalmers.
JIM CHALMERS:
And to you Steve. I've missed you. It's been too long.
AUSTIN:
Has any wealthy person in the really top income bracket rung up and said, "I'm unhappy"?
CHALMERS:
They haven't rung me, Steve. But no doubt people have got a view on these tax cuts that we're proposing today. What I'd say to people on higher incomes is that everybody is still getting a tax cut. The tax cut is still substantial for people on the highest incomes, but it's right to say that there is a much bigger emphasis on middle Australia in the tax changes that we are announcing today –
AUSTIN:
Let me jump in there, Jim. Why are you focusing particularly on middle Australia or lower‑income workers? Why are you worried about them so much?
CHALMERS:
Because they're under the most cost‑of‑living pressure. We understand that everyone is under cost‑of‑living pressure, but particularly people on middle incomes and people on lower incomes, and these tax changes that we're announcing today are about a bigger tax cut for more people to help them with these cost‑of‑living pressures. We found a much better way, better for middle Australia, better for cost‑of‑living, and better for the economy, to deliver roughly the same amount of tax relief in a way that recognises the pressures that people are under. That's why we've taken a difficult decision here. We didn't take it lightly. We know it's politically contentious but it's the right thing to do. We're doing it for the right reasons and we're doing it because by putting people before politics, we can get a much better outcome for people doing it tough.
AUSTIN:
When does it kick in?
CHALMERS:
First of July this year, Steve. So, all 13.6 million Australian taxpayers will receive a tax cut on the first of July, and it will cost the Budget a substantial sum, but it won't all hit the Budget at once, it will be provided as tax relief in people's pay checks. That's important because we know that people are under pressure and by giving a bigger tax cut to more people we're hoping to ease some of the pressure that people are confronting.
AUSTIN:
There are a few questions coming in this morning about – so, the pension level. So, I think the tax‑free allowance is $18,000 a year when the single person's age pension is $26,000 approximately annually. And the question is, if a pensioner needs that amount to have a basic standard of living, why doesn't an employee need the same amount?
CHALMERS:
Well, we obviously, in coming to this decision today, we worked out the best, most effective way to provide tax relief for people on lower incomes and the big change that we're making is to take the 19 per cent rate down to the 16 per cent rate. There is that tax‑free threshold but, really, everyone who pays tax, everyone earning above the threshold, gets a tax cut under our proposal. It's important to remember that that cohort, people earning less than $45,000, they weren't going to get a cracker under the stage 3 tax cuts that Scott Morrison legislated five years ago. That changes today to provide a bit of relief for people on lower incomes. We're also changing the Medicare levy to benefit people on low incomes, and that's because we recognise that cost‑of‑living pressures happen right up and down the income scale. That's why everyone who pays tax is going to get a tax cut from the first of July under our model.
AUSTIN:
The stage 3 tax cuts, Jim, were designed to cope with or tackle bracket creep, where a whole lot of people had actually been bumped up a tax bracket because of their increased income. So, is this really a tax cut or simply compensating for bracket creep, Jim Chalmers?
CHALMERS:
Bracket creep is a really important consideration here and one of the reasons why we're taking the $120,000 threshold up to $135,000 and why we're taking the $180,000 up to $190,000 is because we recognise that you need to return bracket creep when it's responsible and affordable to do that. We've been saying that for some time, and one of the things I'm going to do today, Steve, which is a bit unusual, is I'm going to release the Treasury advice that was provided to myself and the PM that led to this decision. What the Treasury advice says is that there's a better way to return bracket creep than what was proposed under the Morrison era tax cuts. There's a better way to return bracket creep. One of the frustrations, Steve, when you and I have talked about economic reform over the years, and our appetite and our ambition is that some people think that the only way to reform the tax system, is reform that overwhelmingly benefits people on the highest incomes. But I think you can make the tax system more aspirational. You can have better work incentives for teachers and truckies and nurses right up and down the income scale. This tax reform, which the Treasury advice will analyse in some detail, is a better reform because it is more aspirational. It provides more work incentives for more people, and part of that is ensuring that we return some of this bracket creep.
AUSTIN:
My guest is Australia's Treasurer, Jim Chalmers. This is ABC Radio Brisbane. Keen to get your thoughts on what the Treasurer is saying. 1300 222 612 is the phone number you can call now. Jim, for people under $80,000 a year. The suggestion from listeners is that it's not really a tax cut because it's only going to replace the tax offset which your government cancelled last July. So, it's really just a compensation for what you've already taken away.
CHALMERS:
Well, a couple of things about that. First, it’s called the LMITO and that was never intended to be permanent. My predecessor, Josh Frydenberg, in a burst of honesty, said that it was never intended to be permanent. So, I didn't end that, that was budgeted to end in the last Budget of my predecessor. The second and more important point is that the LMITO is a one off, it's a temporary payment to people. What we are proposing here is permanent ongoing tax relief in the Budget, and if you're on $80,000, then you will be a substantial beneficiary of what we are proposing here. Your tax cut is around double what it would have been under stage 3. And people on $80,000, people on the average income, $73,000, people on $100,000, $140,000. These are the sorts of income levels who will be the big beneficiaries of what we're proposing.
AUSTIN:
Inflation in Australia is nearly double the target range for the Reserve Bank. How does this not potentially feed the inflation beast?
CHALMERS:
Well, two things about that. First of all, overall, inflation is moderating in the economy, and the amount of money that was provided for stage 3 is already factored into the inflation forecasts that the Reserve Bank and the Treasury and others maintain. Secondly, it's better to provide this kind of relief as ongoing tax relief than a big one‑off lump sum which would be more inflationary. If it all hit the economy at once on the first of July, all $107 billion of it that would obviously be problematic from an inflationary point of view. We're not doing that, we're providing ongoing tax relief instead. What the Treasury advice will show and the indications that we got from the Reserve Bank Governor, when we consulted her as well is that there's not expected to be additional pressure on inflation because what we're announcing today is the same amount of money as stage 3. Stage 3 was going to cost about $106 billion over these four years of the Budget, it'll now be about $107 billion, so, broadly revenue neutral. Both the Treasury and the Reserve Bank have said that's important when it comes to inflation.
AUSTIN:
Jim, thanks for your time.
CHALMERS:
Appreciate it, Steve. All the best.