9 May 2018

Interview with Raf Epstein, ABC 774 Pollie Graph

Note

Subjects: 2018 Budget, citizenship

RAF EPSTEIN:

It is down the side of the couch money, you know that spare $50 note you once found when you finally cleaned under the couch cushions? It's kind of the same thing that happened to the Treasurer, Scott Morrison, he was kind of running his hands around the edges of the sofas at Treasury. There is an extra $35 billion over four years. When they were looking at the numbers at Christmas they did not expect to find that money. Now they are not giving it all away, they are giving a little under half of it back and pretty much they are giving that back straight away. If you are in classic middle income swing voter territory you could get as much as $500 back next July. There is also a promise in the future – this Budget says that if you vote for the Coalition at the next two elections, maybe, I reckon three but it depends, if you vote for them they will flatten out the tax system, the marginal tax rate system so that everyone earning from $40,000 to $200,000 will pay the same amount of marginal tax. It means that you might collect more overtime, you might get a pay increase and you won't move into a higher tax bracket. Whereas at the moment your marginal tax rate might be 32 per cent, 37 per cent, 45 per cent and then as you earn more you might start a greater share of tax. So what message do you think the Coalition is sending? If everyone from $40,000 to $200,000 has the same marginal tax rate – is it saying that even as you work hard and earn extra you will be rewarded and not punished, that there is no disincentive to work more or is it saying that a flatter tax system is a less progressive tax system and that when you don't have different rates for different income levels we become less concerned with paying for the health and education of others?

One of the Government's crucial finance ministers, Kelly O'Dwyer, will join us, so too member of Shadow Cabinet, Clare O'Neil.

Clare O'Neil is the Member for Hotham here in Melbourne for the ALP, she is the Shadow Minister for Justice. She is of course part of the Opposition Leader Bill Shorten's team. Clare good afternoon.

CLARE O'NEIL:

G'day Raf – how are you?

RAF EPSTEIN:

I am very well and the Liberal Member for Higgins is also the Minister for Revenue and Financial Services – Budget day is a big day if you are a minister like Kelly O'Dwyer, good afternoon.

KELLY O'DWYER:

Good afternoon Raf and good afternoon Clare.

RAF EPSTEIN:

Kelly can I start with you? If the Coalition is the low taxing party why is tax going up and up as a percentage of the economy over the next 4 years?

KELLY O'DWYER:

Well we're actually looking to put a speed limit on how much tax is collected because we recognise that there is not a money tree in Canberra – tax actually comes from the hard work and the initiative of millions of Australian people and so we actually have to try and provide tax relief and return as much of that as possible whilst also doing the job…(interrupted)

RAF EPSTEIN:

That speed limit Kelly O'Dwyer has only ever been breached by Coalition Governments in the last 47 years – it's not much of a speed limit.

KELLY O'DWYER:

The previous Howard Government did breach it but you have got to have actually put a speed limit on it I mean if you have no speed limit whatsoever…(interrupted)

RAF EPSTEIN:

Why is it still going up – if you are the low taxing party why is it still going up?

KELLY O'DWYER:

Well we've put a speed limit on and we are sticking under the speed limit and we are actually returning people's money to them through the tax plan that we have announced, the personal income tax plan that we have announced, where in fact, as you know, for our seven year tax plan making sure that 94 per cent of taxpayers will pay no more than 32.5 cents in the dollar. Now if we left the system unchanged, that compares to about 63 per cent. And of course that would mean that people would be paying much, much higher taxes so we believe it's important for people to be able to get more of their money back – they've earnt it, they should keep it, they know how best to spend it. So we have in a responsible and prudent way announced a tax plan that is affordable, that is still very progressive because the truth is – the more that you earn the more tax you pay but we are going to be giving relief to people straight away. We are going to be giving relief to lower and medium income earners with up to $530 as a tax offset but we are going to be substantially structurally changing the tax system to knock out the 37 per cent rate so that we have people only paying 32.5 cents in the dollar up to $200,000 from $41,000.

RAF EPSTEIN:

Is that two elections away, or three?

KELLY O'DWYER:

It is a number of elections away, however, I'd say this to you Raf, we plan to legislate this in the Parliament. That's one vote in the House of Representatives and one vote in the Senate. We introduced that legislation today. We simply need the agreement of the Labor Party to get it passed both the House of Representatives and the Senate. And then it will be set for that whole period of time.

RAF EPSTEIN:

They might be able to undo it, but I'll get onto the mechanics in a moment. Clare O'Neil, just a quick response on tax as a share of the economy continuing to go up. Are you ok with that?

CLARE O'NEIL:

Well, Raf, we're having a discussion about something that's just completely arbitrary and divorced from the fact that governments provide people with essential services. We can't just tax about tax cuts without understanding what we give up as a consequence and the very act of government is a negotiation between the people and government about how we balance the tax that people pay and the services that they get.

RAF EPSTEIN:

I'm not saying that services aren't important Clare, but I know for many voters if the proportion of the economy taken up by tax continues to increase, that's a concern.

CLARE O'NEIL:

Well I don't think people, frankly, Raf care whether 23.9 per cent is the number that's used or 24.1. I mean this is honestly a completely arbitrary number. The Government's been in place for five years, and yet suddenly this year there's this essential hand brake that has to be put on tax. The other thing that's important's not just about government services, it's about who pays that share of the economy that's being paid in tax. And what we see with this Budget yet again is more of the same from the Coalition. This is a Budget that bakes in the $80 billion of cuts to big business, it's a Budget that bakes in you know raising the retirement age to 70, the pension will be cut through the reduction of the energy supplement and of course those $17 billion of cuts to education and cuts to health are still in there as well. So let's just be really clear that we can talk about x per cent or y per cent all we like, but what we're really talking about here is the constituents that Kelly and I represent and whether they've got world class hospitals to go to, great schools to send their children to and universities to get a better education.

RAF EPSTEIN:

I will give you a chance to respond Kelly O'Dwyer. I just want to try and follow up something with Clare O'Neil and see if she'll give your Government any credit. This is the last Budget with a deficit. Next Budget won't have a deficit. Debt has peaked. That's significant. Do you give them some credit for that?

CLARE O'NEIL:

Well both parties are committed to reducing the deficit Raf, and that is really important and I don't shy away from that to any extent. I'm not sure that the fantastic economic performance that the Coalition is crowing about is actually real because as you've just indicated, there's been a huge windfall gain to the Budget, billions... (interrupted)

RAF EPSTEIN:

Some of that would be company tax, multinational stuff, some of it comes from that.

CLARE O'NEIL:

Well um Raf, the multinational tax have not become Australian law yet, so before anyone goes around taking credit for growth that results from a law that doesn't exist yet, they need to be aware of that fact. But Raf, I mean we want to bring the Budget back into balance, the Coalition's announced they're going to do that a year earlier than planned. Labor will match that announcement.

KELLY O'DWYER:

Can I just quickly respond to that, I mean Clare might not have been paying attention to how she was voting in the Parliament on multinational anti-avoidance laws... (interrupted)

CLARE O'NEIL:

I pay close attention Kelly.

KELLY O'DWYER:

Let me tell you, that was passed, that's law and we have returned $7 billion in sales annually back to the Australian people, which means that we are getting higher tax as a result of the integrity measures that we have put in place and legislated and delivered in the Parliament. We have put in place a diverted profits tax so that we can't have these big companies shifting profits overseas. We've made sure that we've got proper thin capitalisation laws so that we've got real integrity around our taxation system... (interrupted)

RAF EPSTEIN:

I'm sorry Kelly O'Dwyer, is that $7 billion over one year or four?

KELLY O'DWYER:

That's one year, that's one year in sales, right. So it's all very well for Clare to pretend that somehow there's some massive windfall. It's extraordinary how these windfalls only seem to happen for Coalition Governments but not for Labor governments. But we have been doing the hard work. And the truth is that when you grow the economy you actually get more tax back, whereas Labor has got a plan to actually increase the tax take by more than $200 billion. That doesn't grow on trees.

RAF EPSTEIN:

I will get onto some of that. Clare O'Neil and Kelly O'Dwyer, If I can squeeze Steven from Narre Warren into this conversation. I think you've got a query Steven, what is it?

CALLER:

Yeah, I wanted to ask Kelly O'Dwyer if the tax cuts are so good and it's our money as Scott Morrison says, then why do we need to wait until 2024? Why not give it now?

KELLY O'DWYER:

Well I think we'd love to give it even sooner. But the truth is that we have got to make sure that we are responsible in the way that we put this Budget together. We also have to make sure that we're delivering the services that Australians demand and expect. Clare talked about school funding we're actually delivering an extra $24.5 billion of extra school funding over a decade… (interrupted)

CLARE O'NEIL:

That's not right.

KELLY O'DWYER:

…we're actually putting in place more than $30 billion in addition funding, a 30 per cent increase over the previous five years for new public hospital agreements.

RAF EPSTEIN:

Forgive me Kelly…(interrupted)

CLARE O'NEIL:

Also not true.

KELLY O'DWYER:

We are actually paying for these essential services. It's a balancing act and I absolutely agree that you work hard for your money, and you should keep more of that money, and we are trying to make a structural change that is responsible, in the context of this Budget.

RAF EPSTEIN:

Can I ask you about that structural change, Kelly O'Dwyer. Why are you promising people on $200,000 a tax cut in seven years' time, but there is nothing for people on Newstart, who can't afford to eat?

KELLY O'DWYER:

Well, a tax cut, people keeping more of your own money, is very different to providing a payment to someone. I mean generally speaking that money has come from individuals and its being handed over to someone else.

RAF EPSTEIN:

Does that mean that if you are earning over $200,000 you deserve a cut, but if you are on Newstart you don't deserve to eat?

KELLY O'DWYER:

No. It's not income in the same sort of way, because they haven't worked for that income. They are given a payment, it's a welfare payment, by the Government. It is not income that they have in fact earned. We have a Newstart system, because we believe in a strong social welfare safety net. We want to make sure that people have the opportunity to get on their feet and get back to work. That's what the Newstart payment is all about. Two-thirds of people who are on Newstart get off Newstart within 12 months and that's because that many of them get out there and get a job. We think that that is the right thing to do, because we think that the best form of welfare for people is a Job. You talk about the reduction in tax for somebody on $200,000, well with our changes it's a 2.5 per cent reduction. For somebody on $160,000 it's a 2.4 per cent reduction. Going all the way down, somebody on $30,000 under our plan will get a 8.3 per cent reduction.

RAF EPSTEIN:

Sorry, that a reduction in their tax bill?

KELLY O'DWYER:

That's correct.

RAF EPSTEIN:

Right!

CLARE O'NEIL:

So Raf, perhaps I can jump in and respond to a couple of points that have come up. I want to say something about the tax cuts. So there is an urgent need to provide some relief to Australians who are on low and middle incomes. So to the extent the Budget cuts taxes for those Australians, Labor is fully supportive. We have championed those cuts and we will enthusiastically endorse them…

RAF EPSTEIN:

That is the tax cuts for next July?

CLARE O'NEIL:

Yes that's right, but even with those I have to say Raf, living in my electorate, they are going to be relatively modest, so we are going to see for example a low income person get $4 a week back extra in tax. The average worker in my electorate might get around $8 a week back in tax. And remember this is a Budget that gives back $7.5 million a week to the Commonwealth Bank through the big business tax cuts. So I'm just concerned for people to understand the tax system and all these conversations we are having about trade-offs between different groups of Australians and we just need to be clear about that. Can I just mention as well on Newstart Raf, you've mentioned about that and it's very important that people understand, Kelly is right a lot of people come on to new start and get off straight away but a lot of people don't too. A third of people who are on Newstart have been on Newstart for more than a year. There is one job advertised in the country for every seven unemployed people and I don't want to live in an Australia whether we just leave those people behind. So I agree Newstart is too low and I think it's time that we need to do something about that.

KELLY O'DWYER:

Well we don't…(interrupted)

RAF EPSTEIN:

Kelly O'Dwyer if I can, there is plenty more to talk about, I just want to get a traffic check and then I'll come back to both of you and to our callers as well.

RAF EPSTEIN:

I will get back to the Budget, Clare O'Neil is with me, the Shadow Minister for Justice so to Kelly O'Dwyer Minister for Revenue and Financial Services. Actually they're in Canberra, I am in Melbourne. But Clare O'Neil we're going to get a super Saturday of by-elections, four of the five MPs who will be defending seats will be Labor seats, three of the four were taken down by the citizenship issue, this is all of the casualties today.

REBEKHA SHARKIE:

The High Court ruling in Katy Gallagher I believe is quite clear consequently I will resign.

JUSTINE KEAY:

I will be resigning my seat as the Federal Member for Braddon.

JOSH WILSON:

...that means I will be writing to you Mr Speaker to advise you of my resignation in due course.

SUSAN LAMB:

I will be resigning as the Member for Longman and I will re contest my seat – I am not done yet.

RAF EPSTEIN:

So that's the former Xenophon Party, now Center Alliance's Rebekha Sharkie, and then the three Labor MPs Justine Keay, Josh Wilson and Susan Lamb. Clare O'Neil it's just embarrassing isn't it for Bill Shorten? He gave a rolled gold guarantee that everyone was ok.

CLARE O'NEIL:

Well Raf the High Court has reinterpreted an area of Australian law that's been quite settled for twenty years and the Labor Party has been relying on that definition in how it's been vetting our candidates using that definition, we've been thoroughly vetting our candidates but the law has been reinterpreted. We respect the High Court's ability to do that and, you know, the chips will fall.

RAF EPSTEIN:

You knew as soon as those cases came through last year that trying wasn't good enough – you had to have the… (interrupted)

CLARE O'NEIL:

No, no, no, no. That's not quite right Raf and if you have a look at the High Court ruling you know that the way that they have interpreted the law is extremely strict and it means that there are millions of Australians right now who may not have the opportunity to run for Parliament if they are required to do so at short notice because what the High Court has said is basically you have to have completely renounced your citizenship. For a UK citizen, for example, that can take 6 months and if you've not completed that process before the day of nomination then you are not entitled to sit in the Australian Parliament. So I think that is a regrettable way that the Constitution has been interpreted. I don't think the founding fathers ever imagined that we would live in a country where so many of us have a parent or a grandparent born overseas. But it is what it is and the Labor Party has to deal with that now and we will go to those by-elections and battle them out as hard as we can.

RAF EPSTEIN:

Kelly O'Dwyer – quick response?

KELLY O'DWYER:

Well look I really feel for Clare because…(interrupted)

CLARE O'NEIL:

Thanks Kelly!

KELLY O'DWYER:

…she has to defend the indefensible.

CLARE O'NEIL:

No, no, no – I'm not doing that!

KELLY O'DWYER:

Well I listened carefully to what you said and look I know that's what Bill Shorten and Mark Dreyfus have told you to go out and say. Sadly for Clare though, and sadly for Bill Shorten and Mark Dreyfus, the Attorney General made it very clear today when he went through in some detail the judgement that we knew all of this in October of last year after Matt Canavan actually had his case heard by the High Court. There has been no reinterpretation and in the judgement that was delivered, and I can refer you to the relevant paragraphs 71 and 72, it makes it awfully clear that in fact there is nothing new in this particular ruling.

RAF EPSTEIN:

Kelly O'Dwyer, has there been anything new for decades? I mean it's kind of been, we knew that if you haven't extinguished your link to another country you couldn't stand. Surely you would know that.

KELLY O'DWYER:

Well that's right – that's section 44 of the constitution and the truth is...

RAF EPSTEIN:

But it applies to Matt Canavan, Barnaby Joyce and John Alexander doesn't it?

KELLY O'DWYER:

Yes, but let me tell you the key difference here. When Matt Canavan had a problem he was referred to the High Court, Barnaby Joyce – he was referred to the High court... (interpreted)

CLARE O'NEIL:

Well that's what happened to Katy Gallagher too Kelly.

KELLY O'DWYER:

When John Alexander had an issue he resigned when he couldn't reassure himself that he didn't have a problem – he resigned and had a by-election. Fiona Nash did as well so we did all of this last year and at that time Bill Shorten dug in, he misled the Australian people, he was shonky. He said this was a rolled gold process that he had conducted with Mark Dreyfus and that everyone could be assured there was no problem – not one problem with one Labor member sitting in the Parliament – but we have found out that Bill Shorten can't be trusted and that he misled the Australian people.

CLARE O'NEIL:

Sorry I have to respond to that.

RAF EPSTEIN:

10 seconds because I want to get back to the Budget.

CLARE O'NEIL:

This is silly to say that this is some sort of big Labor-Liberal thing. It's unfortunate that a great deal of people misinterpreted how the Australian Constitution is to be read. We did that. I am sorry that Kelly has to put that shine on everything that we discuss but this is an unfortunate instance, we will go to the by-elections and I hope we win them.

RAF EPSTEIN:

We will find out when they are and then we will have some ability to predict that.

KELLY O'DWYER:

Well they have to resign – this is the other issue. They have to resign today.

RAF EPSTEIN:

Kelly O'Dwyer I do want to try and return to the Budget. I hope you feel like you have both had your say on that issue.

RAF EPSTEIN:

Valerie is in the Yarra Valley, go for it Valerie.

CALLER:

Hi there, thanks Raf. Just a point that I would like to make about people who have to be on Newstart. The assumption always seems to be from LNP that these people haven't ever paid taxes but most of them have been working and paying taxes and so this is why we have the kind of society and system that we have because we want to help people who have fallen on hard times. I just can't believe it – I just can't take it anymore. Thank you very much.

RAF EPSTEIN:

So Kelly O'Dwyer, I guess what she is saying there is that in your comments you are making the assumption or implying that people on Newstart have never paid tax.

KELLY O'DWYER:

I have never said that and that's not anything that I have ever said. I am simply saying that Newstart is not a payment designed for people to live on that forever. It's there to help people get back to work, it's designed as a welfare payment. We believe very strongly as Liberals in a strong social safety net but you have got to be able to pay for that.

RAF EPSTEIN:

Do you feel sorry for the people living on $40 a day?

KELLY O'DWYER:

I think it would be very difficult to live on $40. There is no question about that but we have to make sure that there is fairness all around so that when we have a system where you're taking money from some people and giving it to other people there has got to be a balance, it has to be fair not only for the person receiving the money but for the person who is handing it over.

RAF EPSTEIN:

Can I just cover off on two more areas? I do want to get to the ABC funding but just on the new tax system Kelly O'Dwyer, a flatter tax I think is very appealing to some people. Is it less progressive if the person on $40,000 pays the same marginal tax rate as someone on $200,000? Is that less progressive?

KELLY O'DWYER:

Well no, as I was trying to explain to you before if you actually go through and you look at how much of a reduction each person is getting if they are on $50,000, let's say, they are getting a 6.3 per cent reduction on the amount of tax they pay. If they are on $120,000... (interrupted)

RAF EPSTEIN:

Forgive me Kelly O'Dwyer I am not trying to make a judgement on what we have then as opposed to what we have now but the progressive tax is about how people on different incomes get treated, no?

KELLY O'DWYER:

But this is the point I am making is that you have actually got a bigger reduction if you are on a lower income that if you are higher up the scale. We still have a very progressive tax system and the reduction is much greater for those people on lower incomes because of course the proportion is greater for them.

RAF EPSTEIN:

Clare O'Neil it's going to appeal to people when they think about overtime and a wage rise isn't it?

CLARE O'NEIL:

I don't actually, I think that's not really giving Australians enough credit Raf. We can be incredibly proud of having a progressive tax system because we're a country that believes in equality and you are absolutely right – by definition if we put people on very high incomes and very low incomes in to the same tax bracket then we are removing some of the progressiveness of our system and this is part of the issue.

RAF EPSTEIN:

So you don't think it's electorally appealing?

CLARE O'NEIL:

I guess the public will make the decision on that. As I have said the tax cuts at the lower end here – absolutely essential, they're fine – but the way that the Coalition has framed this whole tax package is a shift in responsibility from people who are paying tax on high incomes to people who are on low incomes and the thing that I am worried about Raf is that when we look ahead to the outer years of this seven year program we're going to have someone on $37,000 a year in the same tax bracket as someone who earns $200,000 a year.

KELLY O'DWYER:

But I can make a point about how much tax they actually pay?

CLARE O'NEIL:

Kelly let me finish. So one of those people, that person on the low income, will get a $4 a week tax cut, the high income person will get a $140 a week tax cut and the Commonwealth Bank will get a $7.5 million dollar a week tax cut and that is not in my mind Australian values at work.

KELLY O'DWYER:

We've heard all of those lines.

RAF EPSTEIN:

Last minute Kelly O'Dwyer forgive me if we can just spend the last minute, I know it's not your portfolio, we're going to have a chat about the ABC funding cut, or I should say freeze. No one from the ABC itself wants to speak about the issue – is it punitive to give a funding freeze to something that is funded by the Government without telling them? The ABC was clearly surprised by the change. Does that mean it is punitive?

**Line cuts out**

Oh I'm not sure what's gone on there. I think we might have had a problem with our line in Canberra. That's a shame I don't even get to farewell Clare O'Neil and Kelly O'Dwyer. That's ok, well Clare O'Neil is the Member for Hotham, ALP member, she's the Shadow Minister for Justice, at least they got most of their budget lines in and Kelly O'Dwyer the Member for Higgins and Minister for Revenue and Financial Services, also Minister for Women, but very much in this context, this Budget discussion, the Minister for Revenue.