JAYES:
Joining me now to discuss this is the Assistant Treasurer, Kelly O’Dwyer – of course she has her Small Business Minister hat on as well. Kelly O’Dwyer thanks so much for your time to join us from Canberra this afternoon.
MINISTER O’DWYER:
Great to be with you.
JAYES:
Can I first ask you about the GST, Bill Shorten has described it as lazy. He is right isn’t he? It’s not tax reform; it’s just a revenue increase if the Government did go down that path.
MINISTER O’DWYER:
It is pure speculation in terms of what the Government is actually doing. I think Bill Shorten has really put the cart ahead of the horse here. The important point to make here is that we are currently having a discussion with the Australian people, with anyone who has got a good idea about how we can unshackle our economy, how we can create prosperity for the next 25 years – we’ve already had 25 years of uninterrupted economic growth. We want to make sure that that uninterrupted economic growth continues. Prosperity is not predestined and we need to make sure that we get the economic settings right in this country to allow business to grow and prosper and to create jobs. One of those leavers is of course our taxation system and what we’re talking about is not simply putting up taxes, we are saying is you need to get the tax mix right. That means not just looking at Commonwealth taxes but at State taxes as well. What we heard today from Bill Shorten was really a missed opportunity to engage in the great economic debate that we need to be having as a nation. He really lacks ambition I think for our nation in being so small minded about this discussion, in taking things off the table before we’ve even started to have the conversation. So I would just say it is disappointing that the Labor Party don’t seem to want to participate in this discussion. That won’t dissuade us though from continuing to talk with those people who believe it is important for us to have an innovative economy, a dynamic economy, an economy that can be agile in this next Century - that will mean that we are going to be in the best possible place to grow our economy and to create more jobs.
JAYES:
Are you concerned though, Minister, about the idea of any GST change – whether it be increasing the rate or broadening the base, however the mechanics do end up. It is being treated like a magic pudding by various interest groups, I mean the list is long. You say everything’s on the table but the table is full of ideas about how to spend that extra revenue. It doesn’t seem like there’s many ideas about how to actually make the system more efficient. What taxes could be abolished?
MINISTER O’DWYER:
You need to have that discussion about what taxes could be abolished and I think that’s an important part of this conversation. Simply putting up taxes to chase ever increased spending is not the solution here. We need to talk about how we can grow our economy and in growing our economy we are going to be able to grow our revenue base. That’s the basis on which we are having this broader discussion. Now one of the great problems that we know we face in Australia is that we have a very large reliance on income taxes, personal income taxes, and company income taxes. In fact, outside of Denmark in the OECD, we have the greatest reliance on these as part of our revenue. One of the problems that we face is that the average Australian worker is going to be in the second highest tax bracket going into the next year or so. Within two years we are going to see more than 300,000 Australians in the second highest tax bracket - moving into that tax bracket. That is not sustainable, that is not what we should be having in this country. We should have fewer people in the highest tax brackets, particularly if they’re average income earners.
JAYES:
Now we just had a UK tax expert on the show by the name of Jeremy Sherwood. He was talking about the situation in his country whereby the highest income earners actually pay about 55 per cent of income tax, that’s about 10 per cent higher than our income earners would pay. He had never heard of the term negative gearing. Do you agree that this tax break in particular is predominantly used by the rich?
MINISTER O’DWYER:
It’s important in these sorts of discussions to actually look at the facts. What we do know is that those people who use negative gearing, and negative gearing is used across a range of different things including shares as well as property, which is predominantly the focus of this discussion. For those people who use negative gearing with properties, the average is that the person using that negative gearing has one additional property and a lot of the people who use negative gearing are on incomes of around $80,000 or so. So to say that it is simply used by people who are some of the wealthiest Australians is simply not correct. It is used by a lot of average Australian income earners. I think when we have these discussions, we just need to make sure that we have all the facts on the table – that’s not to say that we should be ruling things in or out, we just need to make sure that the discussion is informed by the facts and that when we have that, it’s a rational, fact-based, and evidence-based discussion.
JAYES:
But how fair is it though because there are some anecdotal cases and I don’t know how wide spread this is, that some people have five or six investment properties that they can leverage as a tax break. Is that fair?
MINISTER O’DWYER:
It is interesting when we talk about fairness, fairness can mean so many different things to different people. There is not one objective notion of the idea of fairness, what is fair to you might not be fair to the person next to you. What I think we need to do in all of this discussion is to take a much broader approach to what some of our economic challenges are. Those economic challenges are how we can grow our economy. If we simply stand still, if we make no change to competition, if we make no change to how much we spend on infrastructure and getting our infrastructure right, if we don’t make any change to our tax system…
JAYES:
Minister if I can stick on negative gearing for just a moment, can I just get to the point of this – is the government keeping the options open when it comes to limiting how negative gearing can be used? For example, two key aspects of this that have been talked about by a number of economists is that you could limit the amount of properties you could negatively gear, and also limit the amount of time a property could be negatively geared, is that something you are open to?
MINISTER O’DWYER:
Certainly there are a lot of people who raise different issues that they would like the government to examine in this broader discussion and I have to take you back to first principles here because in examining this we have to ask ourselves the question is this going to make our economy more agile, is this going to unshackle the economic and entrepreneurial spirit of individuals, who may want to start a business or grow their business and create more jobs, that is the approach that we take to examine all of the proposals that are on the table. We are not taking anything off the table because we know that we have to examine all of these ideas not in isolation but holistically. We have to do that while also considering our transfer system as well, our superannuation system, all of this is interrelated and that is why we are not going to be small minded, we are not going to be taking things off the table. We are going to be having a rational discussion that respects the intelligence of the Australian people.
JAYES:
But it seems like Bill Shorten in his speech today is going to go down this path though, are you happy to have the conversation with the Opposition, are you – where are you from the start, are you quite positive about where the conversation on negative gearing would go? Is it on the table?
MINISTER O’DWYER:
I would love the Opposition to be at the table but as we heard today in terms of the broader economic debate and the challenges that face our nation and the opportunities that are available for our nation, unfortunately the Labor party hasn’t really turned up. We heard a number of recycled ideas that have been announced many times before. We didn’t hear any new ideas from the Leader of the Opposition, we heard that he wasn’t prepared to even have a discussion or a debate about a range of issues; I think that is a real shame that he lacks ambition for our nation.
JAYES:
Just one final question and looking at your other portfolio now on Small Business, Bruce Billson was pretty loved by the business community, he wanted to take the idea…
MINISTER O’DWYER:
I love Bruce.
JAYES:
We all love Bruce - take the idea of an effects test recommended by the Harper Review to Cabinet, it didn’t quite make it there, will you be revisiting that, reviving it?
MINISTER O’DWYER:
So the Cabinet will be having a discussion about the Harper recommendations. The Prime Minister and the Treasurer have made it very clear that this is not a report that is simply going to gather dust. We know that one of the great reforms of the previous Hawke and Keating era, and Howard and Costello era was the micro-economic reform that was able to unleash the economic potential of our nation, adding so much to our economy and this is something that we recognise needs to be unleashed again and there are a lot of recommendations within Harper that will allow us to do that with those broader competition principles that will be at play. So the Government will be making an announcement in the not too distant future in relation to Harper. We know that small business is very interested in how they can be even more competitive and how they can compete with others. I take an active interest in this as the Small Business Minister. We will have that discussion around the Cabinet table and we will make our announcement in the not too distant future.
JAYES:
Assistant Treasurer Kelly O’Dwyer, and Small Business Minister, thanks so much for your time this afternoon.
MINISTER O’DWYER:
Great pleasure.