TICKY FULLERTON:
Well it’s the first chilly day back in Canberra for our elected MPs and a fair amount on the Government’s to do list in terms of bills including those to reduce income tax and company tax. They are going to have some tough negotiating ahead one would think. There has also been the Productivity Commission report in to super recommending a shakeup in to the whole system. Kelly O’Dwyer, Minister for Revenue and Financial Services, joins me live now from Canberra. Minister, fairly chilly down there?
KELLY O’DWYER:
It’s very chilly indeed – I’ve been wearing my scarf.
TICKY FULLERTON:
Good on you! Right well let’s get straight to it, can I start with this story in The Australian? A Treasury study confirming a $10 billion hole in Bill Shorten’s plan to axe franking credit refunds for retirees. Now, Labor Shadow Treasurer Chris Bowen has come out of the blocks – he says this is politicising Treasury.
KELLY O’DWYER:
Well no, the only people who have actually politicised Treasury have been the Labor Party, unfortunately, casting aspersions on the staff who work at Treasury and actually casting aspersions on Treasury as a whole. I think it's very unfortunate that they have chosen to go down this path. It's pretty obvious that you would cost up various different measures and make sure that you are very clear on the figures that you are talking about. That's been done in relation to...(interrupted)
TICKY FULLERTON:
But Chris Bowen says Treasury has confirmed that there was no external review contrary to what the Treasurer was saying, he says, and he says, it's deliberately undermining the Parliamentary Budget Office which has done costings for Labor which did take in to account a range of behavioural costings.
KELLY O’DWYER:
Well part of the problem is that the Labor Party refuses to release the assumptions that are behind the costings that they asked for from the Parliamentary Budget Office. If anybody is undermining the Parliamentary Budget Office it is in fact the Shadow Treasurer, who has put them in the most invidious position, where he has asked them to cost up a position based on a whole range of assumptions, that he has actually put in to what he has asked to be costed, and he is now refusing to let the Parliamentary Budget Office actually release all of their costing because of course it will reveal those various assumptions on which their costing is based. So Bill Shorten and Chris Bowen have been caught out on this. We know that the very people that they say that they are targeting – multi-millionaires – are not the people who will be targeted at all. In fact it's those people who are on much lower incomes who will be, basically, double taxed. They won't get their refund, their tax refund, if they have got very low incomes because, unfortunately, they will have a very low marginal tax rate and they won't be able to get the benefit of those refunds, where somebody of course who is much wealthier will be able to organise themselves in a way that means they do get the benefit of those franking credits, so it's really perverse.
TICKY FULLERTON:
It's a lot of money there sitting in that cash bag of the franking credits. It's a lot of money that potentially could go to better use.
KELLY O’DWYER:
The thing that they seem to fail to understand, is that it is individuals' money. I mean they seem to think that all tax money belongs to them and to the Government. We don't have that view. We have a very different view to the Labor Party. We believe that if you earn your income, hard earned income, you deserve to keep as much of that as you possibly can, obviously after you guarantee, as the Government needs to do, the essential services that we rely upon.
TICKY FULLERTON:
Moving to income tax cuts and Labor's desire to split your bill – once again Bill Shorten is saying if you want to give promises of tax cuts in more than two elections time, fight the next two elections and see where we go to then.
KELLY O’DWYER:
You can deliver certainty here and now by two votes, one in the House of Representatives, which they've done, and one in the Senate, which will come and we will argue our case ferociously.
TICKY FULLERTON:
But in order to get this through Kelly O'Dwyer if it means getting these first two phases of tax cuts through wouldn't that be better for Australians than an all or nothing situation?
KELLY O’DWYER:
What would be best for Australians is to deliver the package as a whole which we will continue to argue with the colleagues in the cross bench, which as you know is a bit of a movable feast at the moment in the Senate.
TICKY FULLERTON:
Yeah how are you going with that?
KELLY O’DWYER:
I know that we're certainly having all of the discussions that we need to be having but it's unfortunate that Labor is playing politics with this because the truth is Australians could in fact have their tax relief delivered with a vote in the Senate if the Labor Party would only support it. I mean why should we not have 94% of Australians not paying more than 32.5 cents in the dollar? That would be a great thing that we've accounted for bracket creep. That would also allow people to take on extra hours at work, go for that promotion, or go for that new job that might pay a bit more.
TICKY FULLERTON:
As the Greens would argue it's all about where you spend I suppose but let's move on to superannuation reform because a huge amount has been done in your portfolio here. You made changes in the Budget. But we've got this Productivity Commission report and can I take you to the interview that you did with David Speers. David couldn't seem to get you on the record Kelly agreeing that the Productivity Commission says that industry funds systemically outperformed for-profit funds. My question is, doesn't this play into the hands of Labor who accuse you of being ideologically opposed against industry funds?
KELLY O'DWYER:
Well look, people will always accuse you of various things unfortunately in this job, and my points is, as Minister I'm not there to advocate for one part of the industry over and above the other. I said, and I repeatedly say, that I totally accept at face value the findings of the Productivity Commission. Certainly the average performance of industry funds has been very strong, and there are some well performing industry funds. But as we also know from the Productivity Commission's report, of the bottom 26 default My Super funds, about 10 of those are industry funds and 12 are retail funds, so it really depends on... (interrupted)
TICKY FULLERTON:
Do you think the reason the industry funds have done better, you know the good big ones, is because of the scale that they've been allowed to have and because of the default system? Is that what you think?
KELLY O'DWYER:
Well certainly there is a very strong element that if you have default status, if you've got a huge flow of funds coming into your particular fund, that gives you certainly greater advantages. But let me make this point – you can't actually invest in an average industry fund or an average retail fund, you can't actually do that. And you can have the best performing industry fund and if you have got a low-balance account, or a retail fund for that matter, if you've got a low-balance account, and you are being eroded through high administration fees and investment fees, through high insurance premiums that you've been defaulted into, if you're eroded down to zero, the performance really doesn't count for much if you're left with nothing at the end of the day.
TICKY FULLERTON:
Now you've said you're going to look at the Productivity Commission's best in show idea. You're also quite supportive of Peter Costello's Future Fund idea, effectively a default Future Fund. Now the Productivity Commission does not like that. It sees it as anti-competitive.
KELLY O'DWYER:
Well look I think all good governments look at the all information that's presented to them and carefully evaluate it, and I will certainly do that as Minister. I mean at the end of the day I just want to make sure that we have a good and well functioning system that will benefit millions of Australians. We know unfortunately from the evidence that's been presented by the Productivity Commission that the system right now is broken for millions of Australians and it has cost them millions upon millions of dollars in retirement savings. We want to make sure that that's fixed. We will fix the problems created by Bill Shorten when he uncapped fees and charges for low-balance accounts.
TICKY FULLERTON:
Well we see today Kelly O'Dwyer, we see today that actually it's the banking sector that appear to be pushing back on this fee cap on low-balance super. Industry funds seem fully supportive. What are you going to do about this opposition?
KELLY O'DWYER:
Well I can tell you now that we have gone through a consultation process. That's now been completed and I'm going to be introducing legislation this week that will ensure that we have a three per cent cap for administration fees and also investment fees, as we said we would in the Budget. And that will also include indirect fees. And I don't care whether it's an industry fund or a retail fund, I'm going to do the right thing for consumers and for people who are saving for their retirement.
TICKY FULLERTON:
Can I finally ask you about the Royal Commission, you and others on the Government side were against it to start off with. It's working its way through creating carnage, forcing vertical integration. How do you think we're going to end up after the Royal Commission in the financial services sector? Are you confident that we will be a strong enough sector?
KELLY O'DWYER:
Well look we were always cautious about calling a Royal Commission, which you would expect a prudent government to be cautious about calling for a Royal Commission...
TICKY FULLERTON:
We won't go down that argument but no I'm asking you about what will the commission deliver, do you think? Are you worried about the stability of the financial system after it passes?
KELLY O'DWYER:
Well look the Royal Commission will do the job that we have set it to do, with a very broad terms of reference. We'll obviously have a look at the recommendations that they'll obviously make and we'll evaluate those as you would expect us to do, but I'm not going to pre-judge the findings or where we are going to end up. That's the job of the Royal Commission, they're entirely independent, but I'll be very happy Ticky to come on your program and talk to you once they've handed down those recommendations and talk to you at length about that.
TICKY FULLERTON:
Well that would be terrific. Minister Kelly O'Dwyer, thank you so much for talking to us.
KELLY O'DWYER:
Great pleasure.