DAVID SPEERS:
Welcome to our coverage of Budget 2019. He’s just delivered his first Budget as Treasurer and Josh Frydenberg joins me now, very good evening to you. Thank you for joining us this evening, Treasurer.
JOSH FRYDENBERG:
Good evening to you, David.
DAVID SPEERS:
So, you’ve said Australia is back in the black, but we’re not quite yet, are we? We might be in surplus next year, but it hasn’t actually happened yet.
JOSH FRYDENBERG:
Well this budget is for 2019-2020, and we’ve delivered a $7.1 billion dollar surplus. That’s a $55 billion turnaround on the fiscal mess that we inherited from the Labor Party.
DAVID SPEERS:
Yeah, but the point is that you haven’t delivered that yet. Australians have heard this before, they may be more credible forecasts, sure, but it’s not delivered yet.
JOSH FRYDENBERG:
Well let me take you through the comparison with Wayne Swan. Firstly, he forecast a three per cent of GDP, or a $48 billion turnaround, in one year. What we have seen is a small deficit in 2018-19 which is actually lower than it was projected at MYEFO, and now a $7.1 billion surplus in 19-20, and $45 billion surpluses over the period ahead, and we’ve done that with very conservative estimates around commodity forecasts, compare to the $175 a tonne iron ore that Wayne Swan was seeing; we’re seeing $55 a tonne iron ore in our projections.
DAVID SPEERS:
But, again, my point is: there might be a collapse in China, there might be another terrible drought, you might have to write down the NBN. Things can happen that could prevent you actually achieving this.
JOSH FRYDENBERG:
Well this is not a wafer thin surplus. This is a very significant surplus, and importantly, we got there by reducing spending and by getting more people into work by growing the economy. You see, we have now got our spending to GDP down to 24.6 per cent. That’s below the 30 year average, and it’s below the 25.4 per cent we inherited from Labor. They had spending growth going, you know, rising faster than a jet fighter.
DAVID SPEERS:
How close did you get to a surplus this financial year? Why couldn’t you do that?
JOSH FRYDENBERG:
Well, David, we had a number of spending pressures: we had the floods, we had the drought, we had some one-off Defence payments that need to be made, extra GST payments. All those things contributed to that number being where it is, but it’s still better than MYEFO.
DAVID SPEERS:
Now, you’ve more than doubled the tax cuts for low and middle income earners. That is roughly what Labor promised last year – a little better than what Labor promised last year.
JOSH FRYDENBERG:
Well, significantly better, because…
DAVID SPEERS:
Well, $928 versus $1,080, so it’s a hundred and…
JOSH FRYDENBERG:
No, but David, there’s one point that you’re missing, which is that in 2018-19, Labor was at $530. But, we’re now for 18-19, at $1,080. So you take a dual-income family on $60,000, a teacher and a tradie, they’re going to have $2,160 in their pocket in 13 weeks’ time or when they put in their tax returns.
DAVID SPEERS:
Now, sure, for those workers that’s true. But then over five years, explain this to me: by 2024, you want to give high income earners quite a big tax cut as well.
JOSH FRYDENBERG:
No, what we’re saying is that we want to have a structural change, so that this low middle income tax offset gets phased out, and what we do instead is put in a reduction of thirty two and a half cent down to 30 cent for that tax bracket. And as you may remember…
DAVID SPEERS:
And abolish the 37 per cent.
JOSH FRYDENBERG:
Which is actually legislated.
DAVID SPEERS:
Which means for those earning $200,000 or more, they’ll see a tax cut of $11,000 a year.
JOSH FRYDENBERG:
No, what we’re going to see now, is between those earning …
DAVID SPEERS:
Well, that’s according to your own …
JOSH FRYDENBERG:
Well, you’ve got to look at the percentages. So a person who is on $200,000 a year is only getting, when this plan is fully rolled out, a small proportion of the tax reduction as a proportion of their overall tax being paid, than someone who is on $30,000, or someone who is on $60,000.
DAVID SPEERS:
Okay, so someone on $30,000 gets $255…
JOSH FRYDENBERG:
and that’s immediately with the…
DAVID SPEERS:
Okay, well then in five years’ time, when this is all in place, someone on $35,000 gets $255 a year. Someone on $200,000 gets $11,640 a year.
JOSH FRYDENBERG:
But somebody on $30,000 is only paying a couple of thousand dollars tax, but somebody on $200,000 is paying significantly more. So…
DAVID SPEERS:
Sure, but when you talk about proportion here, the difference – you know, 35 grand and 200 grand income, that’s what, five times the income, tax relief is about 40 times.
JOSH FRYDENBERG:
No, because what you’ve got to compare, is somebody who’s on $200,000 will pay 10 times as much tax as someone who’s on $45,000. So even though their income is not 10 times, they’re paying 10 times more tax. The progressive nature of the system is actually enhanced by these reforms, about the top five per cent of taxpayers, David, pay about a third of the overall tax.
DAVID SPEERS:
I thought this was making it flatter.
JOSH FRYDENBERG:
Well, it does between 45 and 200 thousand, but it keeps the progressive nature…
DAVID SPEERS:
How is it making it progressive?
JOSH FRYDENBERG:
Because we’re putting a whole lot of changes, you see, in 22-23, the 19 per cent tax bracket, at the top end, moves from 37 thousand, to 45 thousand. So if you’re earning, under that amount, you’re going to get a significant…
DAVID SPEERS:
End of the day though…
JOSH FRYDENBERG:
And we’ve also increased what is called the low income tax offset…
DAVID SPEERS:
OK, but at the end of the day, you know, some might point out, you’re earning 35 grand, single mum, you’ll get 250 bucks tax cut, if you’re a millionaire, you’ll get $11,000. Is that fair?
JOSH FRYDENBERG:
Well, let me point out, today, out of the changes that we’ve made today, that person on $200,000, is not getting anything like that…
DAVID SPEERS:
I’m talking about when you whole package…
JOSH FRYDENBERG:
Well the structural change is about turning that low-middle income tax offset into a long term change, and what we’re focussed on, is creating that tax bracket between 45 and 200 thousand, to effectively avoid bracket creep. And you’re going to have 95 per cent of taxpayers paying, you know, 30 cents in the dollar, effectively or less.
DAVID SPEERS:
OK, well, away from tax, there’s one thing I noticed in the Budget papers, you’ve got a saving of more than three billion dollars in decisions taken but not yet announced, it’s not a spending measure but a saving measure. Apparently, you were going to announce a three billion dollar spend…
JOSH FRYDENBERG:
Spend…
DAVID SPEERS:
that you hadn’t announced…
JOSH FRYDENBERG:
That’s right…
DAVID SPEERS:
And now you’re not. What was that?
JOSH FRYDENBERG:
[laughs] Well, you can’t know that, but obviously these are the internal workings of government, but all of those numbers are reconciled through the PEFO process.
DAVID SPEERS:
OK, but that’s helped your Budget bottom line…
JOSH FRYDENBERG:
Well…
DAVID SPEERS:
Not to proceed with this spending.
JOSH FRYDENBERG:
Well, we’ve been prudent with spending as you would imagine but what we have done is targeted spending. There’s more money here for hospitals, creating a children’s cancer hospital, investing in a brain and spinal ward in Adelaide, ensuring carers get respite, this very significant youth suicide and mental health package, perinatal support, early psychosis treatment, 30 new Headspace centres. There’s a big social dividend out of this Budget and you can only do that when you’re growing the economy. I mean, tonight I announced the listing of a new drug on the PBS, that’s for acute leukaemia, these people will now only pay $6.50 a script if you’re on a concession card holder, or $40 if you’re a normal general patient, compared to a$120, $130,000…
DAVID SPEERS:
So finally, Treasurer, have you done enough here tonight, do you think, to help the Government win the Election?
JOSH FRYDENBERG:
Well, this is all about the public, this is all about delivering for them. This is not about us, this is about good policy delivering a stronger economy and securing a better future for all Australians, David. We’ve being focused on the return to surplus, which we’ve achieved. We’ve been focused on growing the economy, given the global headwinds, and the domestic challenges we’ve seen. And we’ve been focused on delivering those essential services. There’s going to be clear contest at the Election, between us, who are promising lower taxes and Labor with their $200 billion of higher taxes.
DAVID SPEERS:
Treasurer Josh Frydenberg, thank you very much for joining us tonight.
JOSH FRYDENBERG:
Good to be with you.